CWB reports record net income and total revenues for the fourth quarter and
fiscal 2009
Dividends declared on both common and preferred shares
-------------------------------------------------------------------------
Fourth Quarter Highlights:
(three months ended October 31, 2009 compared with three months ended
October 31, 2008 unless otherwise noted)
-------------------------------------------------------------------------
- Record net income of $30.4 million, up 24%. Record annual net income
of $106.3 million, up 4%.
- Diluted earnings per common share of $0.39, up 3%. Fiscal 2009
diluted earnings per share of $1.47, down 7% reflecting the net
impact of the preferred units issued.
- Record total revenues (teb) of $90.1 million, up 22%. Record annual
total revenues (teb) surpassed the $300 million milestone to reach
$328.0 million, up 10%.
- Net interest margin (teb) of 2.34%, up four basis points compared to
the fourth quarter 2008, 21 basis points from the prior quarter and
41 basis points from the second quarter 2009. Annual net interest
margin (teb) of 2.10%, down 20 basis points.
- Tier 1 capital ratio of 11.3% and total capital ratio of 15.4%; up
from 8.9% and 13.5% respectively a year earlier.
- Loan growth of 1% in the quarter and 7% over the past twelve months.
- Opened new full-service commercial and retail banking centres in
Saskatoon, Saskatchewan and Kamloops, British Columbia (BC).
- Surpassed $5.0 billion of assets under administration in
Canadian Western Trust Company.
- Introduced a dividend reinvestment plan.
-------------------------------------------------------------------------
On
Banking and trust earnings of
"CWB's record financial performance amidst ongoing economic challenges and effects from the global financial crisis is a very notable accomplishment," said
"We are seeing opportunities to achieve continued high quality growth despite the adverse impacts on loan growth and overall credit quality due to the economic downturn," continued
"As we've stated in prior periods, the Bank's strong capital base has us very well positioned to capitalize on opportunities in our markets and we continue to evaluate our alternatives in this regard. Patience continues to be important for both the Bank and our shareholders at this time."
Financial Highlights
For the three months ended
(unaudited) -------------------------------------- Change from
($ thousands, except October 31 July 31 October 31 October 31
per share amounts) 2009 2009 2008 2008
-------------------------------------------------------------------------
Results of Operations
Net interest income
(teb - see below) $ 68,012 $ 60,934 $ 58,622 16%
Less teb adjustment 2,397 2,189 1,540 56
-------------------------------------------------------------------------
Net interest income
per financial
statements 65,615 58,745 57,082 15
Other income 22,087 24,604 15,437 43
Total revenues (teb) 90,099 85,538 74,059 22
Total revenues 87,702 83,349 72,519 21
Net income 30,357 28,729 24,485 24
Earnings per common
share
Basic(1) 0.42 0.39 0.39 8
Diluted(2) 0.39 0.38 0.38 3
Return on common
shareholders'
equity(3) 13.7% 13.4% 14.4% (70)bp(4)
Return on assets(5) 0.91 0.87 0.96 (5)
Efficiency ratio(6)
(teb) 46.1 47.0 47.7 (160)
Efficiency ratio 47.4 48.2 48.8 (140)
Net interest margin
(teb)(7) 2.34 2.13 2.30 4
Net interest margin 2.25 2.05 2.24 1
Provision for credit
losses as a
percentage of
average loans 0.15 0.15 0.15 -
-------------------------------------------------------------------------
Per Common Share
Cash dividends $ 0.11 $ 0.11 $ 0.11 -%
Book value 12.16 11.87 10.70 14
Closing market value 21.38 18.19 18.44 16
Common shares
outstanding
(thousands) 63,903 63,738 63,457 1
-------------------------------------------------------------------------
Balance Sheet and
Off-Balance Sheet
Summary
Assets $11,635,872 $11,331,377 $10,600,732 10%
Loans 9,236,193 9,137,763 8,624,069 7
Deposits 9,617,238 9,393,809 9,245,719 4
Subordinated
debentures 375,000 375,000 375,000 -
Shareholders' equity 986,499 966,232 679,148 45
Assets under
administration 5,467,447 4,751,886 4,347,723 26
Assets under
management 878,095 835,613 - nm
-------------------------------------------------------------------------
Capital Adequacy(8)
Tangible common equity
to risk-weighted
assets(9) 8.0% 7.9% 7.7% 30 bp
Tier 1 ratio 11.3 11.2 8.9 240
Total ratio 15.4 15.4 13.5 190
-------------------------------------------------------------------------
For the year ended
(unaudited) ------------------------- Change from
($ thousands, except October 31 October 31 October 31
per share amounts) 2009 2008 2008
------------------------------------------------------------
Results of Operations
Net interest income
(teb - see below) $ 236,354 $ 228,617 3%
Less teb adjustment 7,847 5,671 38
------------------------------------------------------------
Net interest income
per financial
statements 228,507 222,946 2
Other income 91,612 70,240 30
Total revenues (teb) 327,966 298,857 10
Total revenues 320,119 293,186 9
Net income 106,285 102,019 4
Earnings per common
share
Basic(1) 1.51 1.61 (6)
Diluted(2) 1.47 1.58 (7)
Return on common
shareholders'
equity(3) 13.2% 15.9% (270)bp(4)
Return on assets(5) 0.86 1.03 (17)
Efficiency ratio(6)
(teb) 48.2 45.2 300
Efficiency ratio 49.4 46.1 330
Net interest margin
(teb)(7) 2.10 2.30 (20)
Net interest margin 2.03 2.25 (22)
Provision for credit
losses as a
percentage of
average loans 0.15 0.15 -
------------------------------------------------------------
Per Common Share
Cash dividends $ 0.44 $ 0.42 5%
Book value 12.16 10.70 14
Closing market value 21.38 18.44 16
Common shares
outstanding
(thousands) 63,903 63,457 1
------------------------------------------------------------
Balance Sheet and
Off-Balance Sheet
Summary
Assets
Loans
Deposits
Subordinated
debentures
Shareholders' equity
Assets under
administration
Assets under
management
-------------------------------------------------------------------------
Capital Adequacy(8)
Tangible common equity
to risk-weighted
assets(9)
Tier 1 ratio
Total ratio
-------------------------------------------------------------------------
nm - not meaningful.
(1) Basic earnings per share is calculated as net income less preferred
share dividends divided by the average number of common shares
outstanding.
(2) Diluted earnings per share is calculated as net income less preferred
share dividends divided by the average number of common shares
outstanding adjusted for the dilutive effects of stock options,
warrants and other common stock equivalents.
(3) Return on common shareholders' equity is calculated as annualized net
income after preferred share dividends divided by average common
shareholders' equity.
(4) bp - basis point change.
(5) Return on assets is calculated as annualized net income after
preferred share dividends divided by average total assets.
(6) Efficiency ratio is calculated as non-interest expenses divided by
total revenues.
(7) Net interest margin is calculated as annualized net interest income
divided by average total assets.
(8) Capital adequacy is calculated in accordance with guidelines issued
by the Office of the Superintendent of Financial Institutions Canada
(OSFI).
(9) Tangible common equity to risk-weighted assets is calculated as
shareholders' equity less subsidiary goodwill divided by
risk-weighted assets, calculated in accordance with guidelines issued
by OSFI.
Taxable Equivalent Basis (teb)
Most banks analyze revenue on a taxable equivalent basis to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the consolidated statement of income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other banks. Total revenues, net interest income and income taxes are discussed on a taxable equivalent basis throughout this quarterly report to shareholders.
Non-GAAP Measures
Taxable equivalent basis, return on common shareholders' equity, return on assets, efficiency ratio, net interest margin, provisions for credit losses as a percentage of average loans and tangible common equity to risk-weighted assets do not have standardized meanings prescribed by generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other financial institutions.
Message to Shareholders
Canadian Western Bank (CWB or the Bank) is pleased to report strong fourth quarter and annual performance in a challenging economic environment in
Fourth quarter net income of
Annual net income increased 4% over 2008 to a record
The Bank's very strong Tier 1 and total capital ratios at
Fourth quarter return on equity of 13.7% was down 70 basis points compared to the same quarter last year, but up 30 basis points from the prior quarter. Return on equity for the year decreased 270 basis points to 13.2%. Quarterly return on assets of 0.91% declined five basis points from a year earlier, but was up four basis points compared to last quarter. Annual return on assets was down 17 basis points for 2009 to 0.86%. Lower profitability ratios compared to the same quarter last year reflect the net impact from the preferred units issued in
Common Share Price Performance
CWB shares ended the fourth quarter at
Dividends
On
The Bank's common shares and Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 3 are currently deemed eligible to participate in CWB's dividend reinvestment plan (the "Plan"). The Plan provides holders of the Bank's eligible shares with the opportunity to direct cash dividends toward the purchase of common shares. Further details for the Plan are available on the Bank's website at http://www.cwbankgroup.com/investor_relations/drip.htm. At the current time, for the purposes of the Plan, the Bank has elected to issue common shares from treasury at a 2% discount from the average market price (as defined in the Plan).
Loan Growth
Loan growth of 1% in the quarter and 7% over the past year reflects the realities of moderated activity related to ongoing economic uncertainties and a cautious outlook regarding the timing and strength of an economic recovery. Recessionary effects had a material impact on new deal flow this year and slower loan growth additionally reflects repayments on existing loans. Some customers across all lending sectors prudently chose to scale back operations and direct cash flows towards the repayment of debt until there is a more certain economic outlook. Despite an encouraging pipeline for new loans, the achievement of CWB's twentieth consecutive year of double-digit loan growth did not materialize. Loan growth will likely remain constrained until economic fundamentals in our markets improve further. While challenging, based on our current view, we expect to return to double-digit loan growth in fiscal 2010 and have set our target at 10%, unchanged from the loan target for fiscal 2009.
Credit Quality
Overall credit quality remained satisfactory and within expectations considering ongoing economic challenges and a cautious outlook. The dollar level of gross impaired loans was
Branch Deposit Growth
Deposits raised through our branch network and Canadian Western Trust Company (CWT) were up 12% over last quarter and 5% compared to a year earlier. The marked increase in branch-raised deposits was driven by growth in the demand and notice component of 19% in the quarter and 31% for the year. The significant growth in demand and notice deposits reflects CWT's recent appointment as trustee for a major Canadian investment dealer, as well as ongoing execution of our strategies to further enhance and diversify the Bank's core funding sources. Customer awareness continued to build for our Internet-based division of the Bank named Canadian Direct Financial(TM) (www.canadiandirectfinancial.com) and we remain optimistic about the potential for this channel to provide a valued source of deposits.
Net Interest Margin
Compared to the same quarter last year, lower deposit costs, increased loan prepayment fees and an improved deposit and securities mix more than offset the negative margin impact from consecutive reductions in the prime lending interest rate, and led to slight improvement in net interest margin (teb) to 2.34%. Our success in pricing new and renewal loan accounts to ensure a fair and profitable return in the context of current markets, coupled with initiatives to negotiate interest rate floors with our customers further benefited net interest margin. The combination of lower overall deposit costs and favourable changes in the deposit mix were primary factors that led to the considerable improvement in net interest margin compared to last quarter. The annual net interest margin (teb) of 2.10% declined 20 basis points compared to fiscal 2008 and continued to have a significant negative impact on growth in both total revenues and overall profitability. Based on the Bank's financial position at year end, it is estimated that every one basis point improvement in net interest margin (teb) would represent an increase of approximately
Trust and Wealth Management Services
Ongoing development of trust and wealth management services is an important part of our overall strategy and continues to provide opportunities for earnings growth, diversification and brand awareness. CWT, which includes Optimum Mortgage, posted very strong financial performance for the year and this positive momentum should continue. Valiant Trust Company's revenues were down reflecting the considerable slowdown in capital markets activity, but we do foresee increasing opportunities for this business moving forward. Our fiscal 2009 acquisition of Adroit Investment Management Ltd. marked the Bank's initial move into wealth management services and we believe this business line has potential to become a more material source of revenue growth.
Insurance
Canadian Direct Insurance Incorporated (CDI) reported strong fourth quarter performance and achieved record earnings for the year. CDI's auto book continued to perform well and offset increased claims experience in the home insurance book which was impacted by severe weather and a number of fires in both BC and Alberta. Our strategies to enhance market share in BC auto also progressed well with further expansion of our broker distribution network in that market. The overall earnings and growth outlook for CDI remains positive.
Outlook
CWB finished the fourth quarter and fiscal 2009 with strong results in what was arguably one of the most challenging years in history for the financial sector, both in
We look forward to reporting our fiscal 2010 first quarter results on
-------------------------------------------------------------------------
Q4 Results Conference Call
CWB's fourth quarter and fiscal 2009 results conference call is scheduled
for Thursday, December 3, 2009 at 4:30 p.m. ET (2:30 p.m. MT). The Bank's
executives will comment on financial results and respond to questions
from analysts and institutional investors.
The conference call may be accessed on a listen-only basis by dialing
647-427-7450 or toll-free 1-888-231-8191. The call will also be webcast
live on the Bank's website, www.cwbankgroup.com. The webcast will be
archived on the Bank's website for 60 days.
A replay of the conference call will be available until December 17, 2009
by dialing 416-849-0833 (Toronto) or 1-800-642-1687 (toll-free) and
entering passcode 41377847.
-------------------------------------------------------------------------
About Canadian Western Bank
Canadian Western Bank offers highly personalized service through 37 branch locations and is the largest Canadian bank headquartered in Western
Management's Discussion and Analysis
This management's discussion and analysis (MD&A) should be read in conjunction with Canadian Western Bank's (CWB or the Bank) unaudited interim consolidated financial statements for the period ended
Overview
CWB recorded strong fourth quarter results reflecting solid performance from both business segments despite ongoing challenges related to a downturn in economic activity and uncertainty regarding both the timing and strength of a recovery. Record quarterly net income from banking and trust operations of
Annual consolidated net income reached a record
Fourth quarter return on equity of 13.7% decreased from 14.4% a year earlier. Return on equity for the year was 13.2%, down from 15.9% in 2008. Fourth quarter return on assets was 0.91%, down from 0.96% last year. Fiscal 2009 return on assets of 0.86% represented a 17 basis point decline compared to the previous year. Although partially offset by strong growth in other income, profitability ratios were negatively impacted by constrained total revenues due to a significantly lower net interest margin and higher non-interest expenses. Compared to 2008, the net impact from CWB's preferred unit offerings completed in
Total Revenues (teb)
Total revenues (teb), comprised of net interest income and other income, of
Net Interest Income (teb)
Quarterly net interest income (teb) of
Net interest income (teb) for the year of
Note 13 to the unaudited interim consolidated financial statements summarizes the Bank's exposure to interest rate risk as at
- a constant structure in the interest sensitive asset liability
portfolio;
- floor levels for various deposit liabilities;
- prime rate decreases limited to 0.25% due to the historic low levels
of interest rates;
- interest rate changes affecting interest sensitive assets and
liabilities by proportionally the same amount and applied at the
appropriate repricing dates; and
- no early redemptions.
For the three months ended
---------------------------------------
October 31 July 31 October 31
($ thousands) 2009 2009(1) 2008
-------------------------------------------------------------------------
Impact of 1% increase in interest rates
-------------------------------------------------------------------------
1 year $ (6,574) $ 9,493 $ 10,324
-------------------------------------------------------------------------
1 year percentage change (2.5)% 3.8% 4.8%
-------------------------------------------------------------------------
Impact of 1% decrease in interest rates
-------------------------------------------------------------------------
1 year $ 10,241 $ 13,058 $ 10,356
-------------------------------------------------------------------------
1 year percentage change 3.8% 5.2% (4.8)%
-------------------------------------------------------------------------
(1) Methodology for the calculation of interest sensitivity at July 31,
2009 does not include a minimum interest rate level for certain
deposit accounts that were included in the October 31, 2009
methodology. Interest rate floors at October 31, 2008 were not
applicable.
As at
Based on the interest rate gap position at
It is management's intention to continue to manage the asset liability structure and interest rate sensitivity through pricing and product policies, as well as through the use of interest rate swaps or other appropriate hedging techniques (see Note 8 to the unaudited interim consolidated financial statements for additional disclosure on derivative financial instruments).
Other Income
Fourth quarter other income of
Other income for the year was
Credit Quality
Overall credit quality remained satisfactory and within current expectations. The Bank's primary markets continue to be materially impacted by global economic factors, particularly as they relate to demand for commodities. Despite these challenges, management believes that Western
For the three months ended
-------------------------------------- Change from
(unaudited) October 31 July 31 October 31 October 31
($ thousands) 2009 2009 2008 2008
-------------------------------------------------------------------------
Gross impaired loans,
beginning of period $ 105,229 $ 107,017 $ 47,539 121%
New formations 70,612 25,111 50,643 39
Reductions, impaired
accounts paid down
or returned to
performing status (35,733) (22,444) (5,841) 512
Write-offs (2,164) (4,455) (705) 207
-------------------------------------------------------------------------
Total(3) $ 137,944 $ 105,229 $ 91,636 51%
-------------------------------------------------------------------------
Balance of the ten
largest impaired
accounts $ 76,101 $ 54,990 $ 56,797 34%
Total number of
accounts classified
as impaired 224 211 161 39
Total number of
accounts classified
as impaired under
$1 million 199 195 142 40
Gross impaired loans
as a percentage of
total loans(1) 1.49% 1.14% 1.06% 43 bp(2)
(1) Total loans do not include an allocation for credit losses or
deferred revenue and premiums.
(2) bp - basis point change.
(3) Gross impaired loans includes foreclosed assets with a carrying value
of $nil (July 31, 2009 - $4,756 and October 31, 2008 - $901) which
are held for sale.
Gross impaired loans at
Gross impaired loans represented 1.49% of total loans at quarter end, compared to 1.14% last quarter and 1.06% one year ago. The fiscal 2009 net new specific provisions for credit losses as a percentage of average loans were 14 basis points; this compares to the Bank's average over the past ten years of 13 basis points (including fiscal 2006 when recoveries exceeded losses). It is expected that the level of impaired loans will continue to experience wider fluctuations than normal until the current economic cycle runs its course. However, actual losses are expected to remain within acceptable levels. Based on current credit quality, management expects the fiscal 2010 provisions for credit losses will remain in a targeted range between 15 to 20 basis points of average loans, consistent with the target range established for fiscal 2009.
The total allowance for credit losses (general and specific) represented 55% of gross impaired loans at quarter end, compared to 71% last quarter and 82% one year ago. The total allowance for credit losses (general and specific) was
Non-interest Expenses
Effective execution of CWB's strategic plan which is focused on long-term, sustainable growth has necessitated increased spending in certain areas. Significant expenditures relate to additional staff complement, as well as expanded premises and technology upgrades. Spending in these areas is an integral part of management's commitment to maximize shareholder value over the long-term and is expected to provide material benefits in future periods. CWB completed previously announced plans with the opening of new full service branches in Saskatoon and Kamloops in the fourth quarter. The Bank expects to open two additional branches late in 2010.
Fourth quarter non-interest expenses of
Fiscal 2009 non-interest expenses of
The fourth quarter efficiency ratio (teb), which measures non-interest expenses as a percentage of total revenues (teb), was 46.1%, compared to 47.7% last year and 47.0% in the previous quarter. This measure improved despite higher non-interest expenses reflecting the combined positive impact on total revenues of loan growth, increased other income, including gains on sale of securities, and a higher net interest margin. The fiscal 2009 efficiency ratio (teb) of 48.2% represented a 300 basis point deterioration compared to last year, but was within the Bank's targeted range of 47 to 49%. Looking forward, an expected positive trend for net interest margin and ongoing discipline with regard to discretionary spending should support improvements to this measure. Management's target for the fiscal 2010 efficiency ratio (teb) is 48% or better.
On
Income Taxes
The income tax rate (teb) for the year was 31.8%, down from 32.7% in 2008. The tax rate before the teb adjustment was 28.2% compared to 30.1% in the prior year. The fiscal 2008 tax rate included
Effective
Comprehensive Income
Comprehensive income is comprised of net income and other comprehensive income (OCI), all net of income taxes, and totaled
Balance Sheet
Total assets increased 3% (
Cash and Securities
Cash, securities and securities purchased under resale agreements totaled
Realized gains on sale of securities in the fourth quarter were
Treasury Management
High liquidity levels have been maintained since
Loans
Total loans grew 1% (
Loans in the Bank's alternative mortgage business, Optimum Mortgage (Optimum), increased 14% in the quarter and 20% over the past twelve months to reach
Deposits
Total branch deposits, including those raised by Canadian Western Trust Company (CWT), were up 12% (
Total deposits at quarter end were
Other Assets and Other Liabilities
Other assets at
Off-Balance Sheet
Off-balance sheet items include trust assets under administration and assets under management. Trust assets under administration totaled
Capital Management
At
During the second quarter of fiscal 2009, the Bank issued 2,990,000 preferred units (the "Public Offering preferred units") for total proceeds of
Based on a
The Series 3 Preferred Shares and the Series 4 Preferred Shares qualify as Tier 1 capital for the Bank. Both the Series 3 Preferred Shares and the Warrants commenced trading on the
Further information relating to the Bank's capital position is provided in Note 15 to the quarterly financial statements as well as the audited consolidated financial statements and MD&A for the year ended
Book value per common share at
Common shareholders received a quarterly cash dividend of
Changes in Accounting Policies
Goodwill and Intangible Assets
Effective
Credit Risk and Fair Value
Effective
Financial Instruments - Disclosures
Effective
Future Accounting Changes
International Financial Reporting Standards
The CICA will transition Canadian GAAP for publicly accountable entities to International Financial Reporting Standards (IFRS). The Bank's consolidated financial statements will be prepared in accordance with IFRS for the fiscal year commencing
During 2008, the Bank commenced a four stage project to identify and evaluate the impact of the transition to IFRS on the consolidated financial statements and develop a plan to complete the transition. The project plan includes the following phases - diagnostic, design and planning, solution development, and implementation. The diagnostic and the design and planning phases are complete, and the solution development phase is expected to be completed by the end of fiscal 2010.
The impact of the transition to IFRS on the Bank's consolidated financial statements for current standards is not yet determinable. CWB continues to monitor the International Accounting Standards Board's proposed changes to standards during Canada's transition to IFRS. These proposed changes may have a significant impact on the Bank's implementation plan and future financial statements.
Controls and Procedures
There were no changes in the Bank's internal controls over financial reporting that occurred during the quarter ended
Prior to its release, this quarterly report to shareholders was reviewed by the Audit Committee and, on the Audit Committee's recommendation, approved by the Board of Directors of Canadian Western Bank, consistent with prior quarters.
Updated Common Share Information
As at
Summary of Quarterly Financial Information
2009
---------------------------------------------------
($ thousands) Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Total revenues (teb) $ 90,099 $ 85,538 $ 75,382 $ 76,947
Total revenues 87,702 83,349 73,707 75,361
Net income 30,357 28,729 21,580 25,619
Earnings per
common share
Basic 0.42 0.39 0.30 0.40
Diluted 0.39 0.38 0.30 0.40
Total assets
($ millions) 11,636 11,331 11,450 10,907
-------------------------------------------------------------------------
2008
---------------------------------------------------
($ thousands) Q4 Q3 Q2 Q1
-------------------------------------------------------------------------
Total revenues (teb) $ 74,059 $ 76,375 $ 73,754 $ 74,669
Total revenues 72,519 74,933 72,402 73,332
Net income 24,485 26,327 25,302 25,905
Earnings per
common share
Basic 0.39 0.42 0.40 0.41
Diluted 0.38 0.41 0.39 0.40
Total assets
($ millions) 10,601 10,057 10,038 9,865
-------------------------------------------------------------------------
The financial results for each of the last eight quarters are summarized above. In general, CWB's performance reflects a relatively consistent trend although the second quarter contains three fewer revenue earning days, or two fewer days in a
The Bank's quarterly financial results are subject to some fluctuation due to its exposure to property and casualty insurance. Insurance operations, which are primarily reflected in other income (refer to Results by Business Segment - Insurance), are subject to seasonal weather conditions, cyclical patterns of the industry and natural catastrophes. Mandatory participation in the Alberta auto risk sharing pools can also result in unpredictable quarterly fluctuations.
Quarterly results can also fluctuate due to the recognition of periodic income tax items. Net income in the first quarter of 2008 included
During the fourth quarter of 2008 and throughout fiscal 2009 the Bank's quarterly net interest income was negatively impacted by compression of the net interest margin mainly resulting from consecutive reductions in the prime lending interest rate coupled with significantly higher deposit costs and other spin-off effects of the global financial crisis. Gains on sale of securities, which are reflected in other income, were unusually high in fiscal 2009 also mainly due to factors associated with the financial crisis, including a steep interest rate curve and wide credit spreads that allowed the Bank to capitalize on investment strategies.
For details on variations between the prior quarters see the summary of quarterly results section of the Bank's MD&A for the year ended
Results by Business Segment
CWB operates in two business segments: 1) banking and trust and 2) insurance. Segmented information is also provided in Note 14 of the unaudited interim consolidated financial statements.
Banking and trust
Operations of the banking and trust segment include commercial and retail banking services, as well as personal and corporate trust services provided through CWB's subsidiaries, Canadian Western Trust Company (CWT) and Valiant Trust Company (Valiant). Effective
Record net income of
Record annual net income of
Quarterly earnings were up 8% (
For the three months ended
--------------------------------------- Change from
October 31 July 31 October 31 October 31
($ thousands) 2009 2009 2008 2008
-------------------------------------------------------------------------
Net interest income
(teb) $ 66,387 $ 59,340 $ 56,993 16%
Other income 17,019 18,651 11,580 47
-------------------------------------------------------------------------
Total revenues (teb) 83,406 77,991 68,573 22
Provision for credit
losses 3,393 3,369 3,187 6
Non-interest expenses 38,997 37,283 32,913 18
Provision for income
taxes (teb) 13,490 11,809 10,163 33
Non-controlling
interest in
subsidiary 59 50 - nm
-------------------------------------------------------------------------
Net income $ 27,467 $ 25,480 $ 22,310 23%
-------------------------------------------------------------------------
Efficiency ratio
(teb) 46.8% 47.8% 48.0% (120) bp
Efficiency ratio 48.0 49.1 49.0 (100)
Net interest margin
(teb) 2.32 2.11 2.28 4
Net interest margin 2.24 2.04 2.23 1
Average loans
(millions)(1) $ 9,161 $ 9,028 $ 8,317 10%
Average assets
(millions)(1) 11,342 11,142 9,902 15
-------------------------------------------------------------------------
For the year ended
-------------------------- Change from
October 31 October 31 October 31
($ thousands) 2009 2008 2008
------------------------------------------------------------
Net interest income
(teb) $ 230,227 $ 222,837 3%
Other income 74,013 54,338 36
------------------------------------------------------------
Total revenues (teb) 304,240 277,175 10
Provision for credit
losses 13,500 12,000 13
Non-interest expenses 147,571 125,748 17
Provision for income
taxes (teb) 45,763 45,780 -
Non-controlling
interest in
subsidiary 232 - nm
------------------------------------------------------------
Net income $ 97,174 $ 93,647 4%
------------------------------------------------------------
Efficiency ratio
(teb) 48.5% 45.4% 310 bp
Efficiency ratio 49.7 46.2 350
Net interest margin
(teb) 2.08 2.29 (21)
Net interest margin 2.02 2.23 (21)
Average loans
(millions)(1) $ 9,007 $ 7,910 14%
Average assets
(millions)(1) 11,055 9,747 13
------------------------------------------------------------
bp - basis point change.
teb - taxable equivalent basis, see definition following
Financial Highlights table.
nm - not meaningful.
(1) Assets are disclosed on an average daily balance basis.
Insurance
The insurance segment is comprised of the operations of CWB's subsidiary, Canadian Direct Insurance Incorporated (Canadian Direct or CDI), which provides auto and home insurance to individuals in BC and Alberta.
Canadian Direct's fourth quarter net income of
Canadian Direct reported record annual net income of
Net income declined
Canadian Direct has implemented the Alberta Insurance Rate Board's mandated 5% rate decrease for basic auto coverage on private passenger vehicles, effective
For the three months ended
--------------------------------------- Change from
October 31 July 31 October 31 October 31
($ thousands) 2009 2009 2008 2008
-------------------------------------------------------------------------
Net interest income
(teb) $ 1,625 $ 1,594 $ 1,629 -%
-------------------------------------------------------------------------
Other income (net)
Net earned premiums 27,072 26,895 24,877 9
Commissions and
processing fees 697 741 742 (6)
Net claims and
adjustment expenses (17,559) (16,660) (16,564) 6
Policy acquisition
costs (5,199) (5,181) (5,212) -
-------------------------------------------------------------------------
Insurance revenue
(net) 5,011 5,795 3,843 30
Gains on sale of
securities 57 158 14 307
-------------------------------------------------------------------------
Total revenues (net)
(teb) 6,693 7,547 5,486 22
Non-interest expenses 2,576 2,927 2,446 5
Provision for income
taxes (teb) 1,227 1,371 865 42
-------------------------------------------------------------------------
Net income $ 2,890 $ 3,249 $ 2,175 33%
-------------------------------------------------------------------------
Policies outstanding
(No.) 175,662 172,979 168,071 5
Gross written
premiums $ 31,537 $ 33,067 $ 28,776 10
Claims loss ratio(1) 65% 62% 67% (200) bp
Expense ratio(2) 26 27 27 (100)
Combined ratio(3) 91 89 94 (300)
Alberta auto risk
sharing pools
impact on net income
before tax $ (722) $ 557 $ (1,060) 32%
Average total assets
(millions) 212 200 191 11
-------------------------------------------------------------------------
For the year ended
------------------------- Change from
October 31 October 31 October 31
($ thousands) 2009 2008 2008
------------------------------------------------------------
Net interest income
(teb) $ 6,127 $ 5,780 6%
------------------------------------------------------------
Other income (net)
Net earned premiums 104,062 97,943 6
Commissions and
processing fees 2,852 2,876 (1)
Net claims and
adjustment expenses (68,996) (64,380) 7
Policy acquisition
costs (20,802) (20,573) 1
------------------------------------------------------------
Insurance revenue
(net) 17,116 15,866 8
Gains on sale of
securities 483 36 1,242
------------------------------------------------------------
Total revenues (net)
(teb) 23,726 21,682 9
Non-interest expenses 10,611 9,418 13
Provision for income
taxes (teb) 4,004 3,892 3
------------------------------------------------------------
Net income $ 9,111 $ 8,372 9%
------------------------------------------------------------
Policies outstanding
(No.) 175,662 168,071 5
Gross written
premiums $ 116,828 $ 107,054 9
Claims loss ratio(1) 67% 66% 100 bp
Expense ratio(2) 27 27 -
Combined ratio(3) 94 93 100
Alberta auto risk
sharing pools
impact on net income
before tax $ (292) $ (973) 70%
Average total assets
(millions) 198 184 8
------------------------------------------------------------
bp - basis point change.
teb - taxable equivalent basis, see definition following
Financial Highlights table.
nm - not meaningful.
(1) Net claims and adjustment expenses as a percentage of net earned
premiums.
(2) Policy acquisition costs and non-interest expenses net of
commissions and processing fees as a percentage of net earned
premiums.
(3) Sum of the claims loss and expense ratios.
Fiscal 2009 Target Ranges and Performance & 2010 Minimum Targets
The performance target ranges established for the 2009 fiscal year together with CWB's actual performance, and minimum targets for fiscal 2010 are presented in the table below:
---------------------------------------------
2009 2009 2010
Target Ranges Performance Minimum Targets
-------------------------------------------------------------------------
Net income growth (1) 2% to 5% 4% 12%
-------------------------------------------------------------------------
Total revenue (teb) growth 5% to 8% 10% 12%
-------------------------------------------------------------------------
Loan growth 10% 7% 10%
-------------------------------------------------------------------------
Provision for credit losses
as a percentage of average
loans 0.15% - 0.18% 0.15% 0.15% - 0.20%
-------------------------------------------------------------------------
Efficiency ratio (teb) 46% - 49% 48.2% 48%
-------------------------------------------------------------------------
Return on common equity 14% -16% 13.2%(2) 13%(2)
-------------------------------------------------------------------------
Return on assets 0.90% - 1.05% 0.86%(3) 0.90% (3)
-------------------------------------------------------------------------
(1) Net income, before preferred share dividends.
(2) Return on common equity calculated as net income after preferred
share dividends divided by average common shareholders' equity.
(3) Return on assets calculated as net income after preferred share
dividends divided by average total assets.
CWB met or exceeded four of its seven fiscal 2009 performance target ranges despite very challenging market conditions and a recessionary environment that was much more pronounced than anticipated when the target ranges were established one year ago. Total revenue (teb) growth exceeded expectations while net income growth, the efficiency ratio (teb) and provision for credit losses as a percentage of average loans were all within the respective target ranges. Realized gains on the sale of securities during the year helped offset the significant financial impact of a reduced net interest margin. Management expects margin improvement in fiscal 2010 will offset reduced securities gains going forward, as such gains are not expected to be sustainable at the levels achieved in 2009. While the return on equity and return on assets ratios were both below the respective targets, the net impact on these ratios from the preferred unit offerings completed in
Minimum performance targets for fiscal 2010 reflect expectations for a return to double-digit loan growth and strong overall performance aided by improved market conditions and a more positive economic outlook compared to 2009. Economic fundamentals in Western
This management's discussion and analysis is dated
Taxable Equivalent Basis (teb)
Most banks analyze revenue on a taxable equivalent basis to permit uniform measurement and comparison of net interest income. Net interest income (as presented in the consolidated statement of income) includes tax-exempt income on certain securities. Since this income is not taxable, the rate of interest or dividends received is significantly lower than would apply to a loan or security of the same amount. The adjustment to taxable equivalent basis increases interest income and the provision for income taxes to what they would have been had the tax-exempt securities been taxed at the statutory rate. The taxable equivalent basis does not have a standardized meaning prescribed by GAAP and, therefore, may not be comparable to similar measures presented by other banks. Total revenues, net interest income and income taxes are discussed on a taxable equivalent basis throughout this quarterly report to shareholders.
Non-GAAP Measures
Taxable equivalent basis, return on common shareholders' equity, return on assets, efficiency ratio, net interest margin, tangible common equity to risk-weighted assets, Tier 1 and total capital adequacy ratios, average balances, claims loss ratio, expense ratio and combined ratio do not have standardized meanings prescribed by generally accepted accounting principles (GAAP) and therefore may not be comparable to similar measures presented by other financial institutions. The non-GAAP measures used in this MD&A are calculated as follows:
- taxable equivalent basis - described above;
- return on common shareholders' equity - net income less preferred
share dividends divided by average shareholder's equity;
- return on assets - net income less preferred share dividends divided
by average total assets;
- efficiency ratio - non-interest expenses divided by total revenues
(net interest income plus other income);
- net interest margin - net interest income divided by average total
assets;
- tangible common equity to risk-weighted assets - shareholders' equity
less subsidiary goodwill divided by risk-weighted assets, calculated
in accordance with guidelines issued by the Office of the
Superintendent of Financial Institutions Canada (OSFI);
- Tier 1 and total capital adequacy ratios - in accordance with
guidelines issued by OSFI;
- average balances - average daily balances;
- claims loss ratio - net insurance claims and adjustment expenses as a
percentage of net earned premiums;
- expense ratio - policy acquisition costs and non-interest expenses
net of commissions and processing fees as a percentage of net earned
premiums; and
- combined ratio - sum of the claims loss and expense ratios.
Forward-looking Statements
From time to time, Canadian Western Bank (the Bank) makes written and verbal forward-looking statements. Statements of this type are included in the Annual Report and reports to shareholders and may be included in filings with Canadian securities regulators or in other communications such as press releases and corporate presentations. Forward-looking statements include, but are not limited to, statements about the Bank's objectives and strategies, targeted and expected financial results and the outlook for the Bank's businesses or for the Canadian economy. Forward-looking statements are typically identified by the words "believe", "expect", "anticipate", "intend", "estimate", "may increase", "may impact" and other similar expressions, or future or conditional verbs such as "will", "should", "would" and "could".
By their very nature, forward-looking statements involve numerous assumptions. A variety of factors, many of which are beyond the Bank's control, may cause actual results to differ materially from the expectations expressed in the forward-looking statements. These factors include, but are not limited to, general business and economic conditions in
These and other factors should be considered carefully and readers are cautioned not to place undue reliance on these forward-looking statements as a number of important factors could cause the Bank's actual results to differ materially from the expectations expressed in such forward looking statements. Unless required by securities law, the Bank does not undertake to update any forward-looking statement, whether written or verbal, that may be made from time to time by it or on its behalf.
Assumptions about the performance of the Canadian economy in 2010 and how it will affect CWB's businesses are material factors the Bank considers when setting its objectives. In setting minimum performance targets for fiscal 2010, management's expectations assume: moderate economic growth in
-------------------------------------------------------------------------
Consolidated Statements of Income
-------------------------------------------------------------------------
For the three months ended
(unaudited) -------------------------------------- Change from
($ thousands, except October 31 July 31 October 31 October 31
per share amounts) 2009 2009 2008 2008
-------------------------------------------------------------------------
Interest Income
Loans $ 116,042 $ 112,275 $ 123,192 (6)%
Securities 11,411 11,124 10,818 5
Deposits with
regulated
financial
institutions 2,393 3,103 3,857 (38)
-------------------------------------------------------------------------
129,846 126,502 137,867 (6)
-------------------------------------------------------------------------
Interest Expense
Deposits 58,963 62,490 75,016 (21)
Subordinated
debentures 5,268 5,267 5,769 (9)
-------------------------------------------------------------------------
64,231 67,757 80,785 (20)
-------------------------------------------------------------------------
Net Interest Income 65,615 58,745 57,082 15
Provision for Credit
Losses (Note 6) 3,393 3,369 3,187 6
-------------------------------------------------------------------------
Net Interest Income
after Provision for
Credit Losses 62,222 55,376 53,895 15
-------------------------------------------------------------------------
Other Income
Credit related 6,150 6,155 5,226 18
Insurance, net
(Note 3) 5,011 5,795 3,843 30
Trust and wealth
management services 4,139 3,557 3,398 22
Retail services 1,865 1,781 1,963 (5)
Gains on sale of
securities 4,103 6,399 948 333
Foreign exchange
gains 647 876 (61) nm
Other 172 41 120 43
-------------------------------------------------------------------------
22,087 24,604 15,437 43
-------------------------------------------------------------------------
Net Interest and Other
Income 84,309 79,980 69,332 22
-------------------------------------------------------------------------
Non-Interest Expenses
Salaries and
employee benefits 26,704 26,977 22,861 17
Premises and
equipment 6,996 6,478 6,022 16
Other expenses 7,373 6,263 6,020 22
Provincial capital
taxes 500 492 456 10
-------------------------------------------------------------------------
41,573 40,210 35,359 18
-------------------------------------------------------------------------
Net Income before
Income Taxes and
Non-Controlling
Interest in
Subsidiary 42,736 39,770 33,973 26
Income Taxes 12,320 10,991 9,488 30
-------------------------------------------------------------------------
30,416 28,779 24,485 24
Non-Controlling
Interest in
Subsidiary 59 50 - nm
-------------------------------------------------------------------------
Net Income $ 30,357 $ 28,729 $ 24,485 24 %
-------------------------------------------------------------------------
Preferred share
dividends (Note 9) $ 3,802 $ 3,802 $ - nm %
Net income available
to common
shareholders $ 26,555 $ 24,927 $ 24,485 8
-------------------------------------------------------------------------
Average number of
common shares (in
thousands) 63,828 63,654 63,418 -
Average number of
diluted common shares
(in thousands) 68,683 65,439 64,165 7
-------------------------------------------------------------------------
Earnings Per Common
Share
Basic $ 0.42 $ 0.39 $ 0.39 8
Diluted $ 0.39 $ 0.38 $ 0.38 3
-------------------------------------------------------------------------
For the year ended
(unaudited) ------------------------- Change from
($ thousands, except October 31 October 31 October 31
per share amounts) 2009 2008 2008
------------------------------------------------------------
Interest Income
Loans $ 455,413 $ 491,991 (7)%
Securities 44,209 52,929 (16)
Deposits with
regulated
financial
institutions 12,803 17,847 (28)
------------------------------------------------------------
512,425 562,767 (9)
------------------------------------------------------------
Interest Expense
Deposits 263,017 317,554 (17)
Subordinated
debentures 20,901 22,267 (6)
------------------------------------------------------------
283,918 339,821 (16)
------------------------------------------------------------
Net Interest Income 228,507 222,946 2
Provision for Credit
Losses (Note 6) 13,500 12,000 13
------------------------------------------------------------
Net Interest Income
after Provision for
Credit Losses 215,007 210,946 2
------------------------------------------------------------
Other Income
Credit related 23,369 26,998 (13)
Insurance, net
(Note 3) 17,116 15,866 8
Trust and wealth
management services 15,478 13,299 16
Retail services 7,403 7,689 (4)
Gains on sale of
securities 25,225 4,725 434
Foreign exchange
gains 2,745 1,225 124
Other 276 438 (37)
------------------------------------------------------------
91,612 70,240 30
------------------------------------------------------------
Net Interest and Other
Income 306,619 281,186 9
------------------------------------------------------------
Non-Interest Expenses
Salaries and
employee benefits 104,105 87,660 19
Premises and
equipment 26,030 22,360 16
Other expenses 26,115 23,145 13
Provincial capital
taxes 1,932 2,001 (3)
------------------------------------------------------------
158,182 135,166 17
------------------------------------------------------------
Net Income before
Income Taxes and
Non-Controlling
Interest in
Subsidiary 148,437 146,020 2
Income Taxes 41,920 44,001 (5)
------------------------------------------------------------
106,517 102,019 4
Non-Controlling
Interest in
Subsidiary 232 - nm
------------------------------------------------------------
Net Income $ 106,285 $ 102,019 4 %
------------------------------------------------------------
Preferred share
dividends (Note 9) $ 10,062 $ - nm %
Net income available
to common
shareholders $ 96,223 $ 102,019 (6)
------------------------------------------------------------
Average number of
common shares (in
thousands) 63,613 63,214 1
Average number of
diluted common shares
(in thousands) 65,335 64,441 1
------------------------------------------------------------
Earnings Per Common
Share
Basic $ 1.51 $ 1.61 (6)
Diluted $ 1.47 $ 1.58 (7)
------------------------------------------------------------
nm - not meaningful.
The accompanying notes are an integral part of the interim consolidated
financial statements.
-------------------------------------------------------------------------
Consolidated Balance Sheets
-------------------------------------------------------------------------
As at As at As at Change from
(unaudited) October 31 July 31 October 31 October 31
($ thousands) 2009 2009 2008 2008
-------------------------------------------------------------------------
Assets
Cash Resources
Cash and
non-interest
bearing deposits
with financial
institutions $ 17,447 $ 38,297 $ 8,988 94 %
Interest bearing
deposits with
regulated financial
institutions
(Note 4) 266,980 357,057 464,193 (42)
Cheques and other
items in transit 12,677 - 18,992 (33)
-------------------------------------------------------------------------
297,104 395,354 492,173 (40)
-------------------------------------------------------------------------
Securities (Note 4)
Issued or
guaranteed by
Canada 854,457 611,644 347,777 146
Issued or
guaranteed by a
province or
municipality 253,143 334,370 452,045 (44)
Other securities 783,809 656,029 429,142 83
-------------------------------------------------------------------------
1,891,409 1,602,043 1,228,964 54
-------------------------------------------------------------------------
Securities Purchased
Under Resale
Agreements - - 77,000 (100)
-------------------------------------------------------------------------
Loans (Notes 5 and 7)
Residential
mortgages 2,282,475 2,100,432 2,134,327 7
Other loans 7,029,177 7,111,545 6,565,280 7
-------------------------------------------------------------------------
9,311,652 9,211,977 8,699,607 7
Allowance for credit
losses (Note 6) (75,459) (74,214) (75,538) -
-------------------------------------------------------------------------
9,236,193 9,137,763 8,624,069 7
-------------------------------------------------------------------------
Other
Land, buildings and
equipment 39,252 31,738 31,893 23
Goodwill 9,360 9,360 6,933 35
Other intangible
assets 6,465 6,801 2,155 200
Insurance related 55,932 55,500 52,943 6
Derivative related
(Note 8) 2,334 4,081 9,980 (77)
Other assets 97,823 88,737 74,622 31
-------------------------------------------------------------------------
211,166 196,217 178,526 18
-------------------------------------------------------------------------
Total Assets $11,635,872 $11,331,377 $10,600,732 10 %
-------------------------------------------------------------------------
Liabilities and
Shareholders' Equity
Deposits
Payable on demand $ 359,176 $ 395,128 $ 383,083 (6)%
Payable after notice 2,778,601 2,239,682 2,010,039 38
Payable on a fixed
date 6,374,461 6,653,999 6,747,597 (6)
Deposit from
Canadian Western
Bank Capital Trust 105,000 105,000 105,000 -
-------------------------------------------------------------------------
9,617,238 9,393,809 9,245,719 4
-------------------------------------------------------------------------
Other
Cheques and other
items in transit 41,964 27,472 29,036 45
Insurance related 145,509 138,996 134,769 8
Derivative related
(Note 8) 74 164 163 (55)
Securities purchased
under reverse
resale agreements 300,242 246,794 - nm
Other liabilities 169,346 182,910 136,897 24
-------------------------------------------------------------------------
657,135 596,336 300,865 118
-------------------------------------------------------------------------
Subordinated Debentures
Conventional 375,000 375,000 375,000 -
-------------------------------------------------------------------------
Shareholders' Equity
Preferred shares
(Note 9) 209,750 209,750 - nm
Common shares
(Note 9) 226,480 224,405 221,914 2
Contributed surplus 19,366 18,708 14,234 36
Retained earnings 511,784 492,274 448,203 14
Accumulated other
comprehensive
income (loss) 19,119 21,095 (5,203) nm
-------------------------------------------------------------------------
986,499 966,232 679,148 45
-------------------------------------------------------------------------
Total Liabilities and
Shareholders' Equity $11,635,872 $11,331,377 $10,600,732 10 %
-------------------------------------------------------------------------
Contingent Liabilities
and Commitments
(Note 11)
nm - not meaningful.
The accompanying notes are an integral part of the interim consolidated
financial statements.
-------------------------------------------------------------------------
Consolidated Statements of Changes in Shareholders' Equity
-------------------------------------------------------------------------
For the year ended
(unaudited) October 31 October 31
($ thousands) 2009 2008
-------------------------------------------------------------------------
Retained Earnings
Balance at beginning of period $ 448,203 $ 372,739
Net income 106,285 102,019
Dividends - Preferred shares (10,061) -
- Common shares (27,992) (26,555)
Issuance costs on preferred units (4,651) -
-------------------------------------------------------------------------
Balance at end of period 511,784 448,203
-------------------------------------------------------------------------
Accumulated Other Comprehensive Income (Loss)
Balance at beginning of period (5,203) (5,931)
Other comprehensive income 24,322 728
-------------------------------------------------------------------------
Balance at end of period 19,119 (5,203)
-------------------------------------------------------------------------
Total retained earnings and accumulated other
comprehensive income (loss) 530,903 443,000
-------------------------------------------------------------------------
Preferred Shares (Note 9)
Balance at beginning of period - -
Issued during the period 209,750 -
-------------------------------------------------------------------------
Balance at end of period 209,750 -
-------------------------------------------------------------------------
Common Shares (Note 9)
Balance at beginning of period 221,914 219,004
Issued on exercise of options 2,200 1,646
Transferred from contributed surplus on
exercise or exchange of options 1,613 1,264
Issued under dividend reinvestment plan 744 -
Issued on exercise of warrants 9
-------------------------------------------------------------------------
Balance at end of period 226,480 221,914
-------------------------------------------------------------------------
Contributed Surplus
Balance at beginning of period 14,234 9,681
Amortization of fair value of options 6,745 5,817
Transferred to common shares on exercise or
exchange of options (1,613) (1,264)
-------------------------------------------------------------------------
Balance at end of period 19,366 14,234
-------------------------------------------------------------------------
Total Shareholders' Equity $ 986,499 $ 679,148
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Consolidated Statements of Comprehensive Income
-------------------------------------------------------------------------
For the three months ended For the year ended
--------------------------- -------------------------
(unaudited) October 31 October 31 October 31 October 31
($ thousands) 2009 2008 2009 2008
-------------------------------------------------------------------------
Net Income $ 30,357 $ 24,485 $ 106,285 $ 102,019
-------------------------------------------------------------------------
Other Comprehensive
Income, net of tax
Available-for-sale
securities:
Gains (losses)
from change in
fair value(1) 1,762 (8,154) 47,214 (2,631)
Reclassification
to other
income(2) (2,672) (637) (17,556) (3,271)
-------------------------------------------------------------------------
(910) (8,791) 29,658 (5,902)
-------------------------------------------------------------------------
Derivatives
designated as
cash flow hedges:
Gains from change
in fair value(3) 889 5,437 9,453 9,341
Reclassification
to net interest
income(4) (1,955) (541) (9,379) (1,773)
Reclassification
to other
liabilities for
derivatives
terminated prior
to maturity(5) - - (5,410) (938)
-------------------------------------------------------------------------
(1,066) 4,896 (5,336) 6,630
-------------------------------------------------------------------------
(1,976) (3,895) 24,322 728
-------------------------------------------------------------------------
Comprehensive Income
for the Period $ 28,381 $ 20,590 $ 130,607 $ 102,747
-------------------------------------------------------------------------
(1) Net of income tax expense of $755 and $20,094 for the quarter and
year ended October 31, 2009, respectively (2008 - tax benefit of
$3,626 and $1,170).
(2) Net of income tax benefit of $1,431 and $7,669 for the quarter and
year ended October 31, 2009, respectively (2008 - tax benefit of $283
and $1,454).
(3) Net of income tax expense of $483 and $4,066 for the quarter and year
ended October 31, 2009, respectively (2008 - tax expense of $2,390
and $4,104).
(4) Net of income tax benefit of $1,075 and $4,035 for the quarter and
year ended October 31, 2009, respectively (2008 - tax benefit of $242
and $775).
(5) Net of income tax benefit of nil and $2,264 for the quarter and year
ended October 31, 2009, respectively (2008 - tax benefit nil and
$429).
The accompanying notes are an integral part of the interim consolidated
financial statements.
-------------------------------------------------------------------------
Consolidated Statements of Cash Flow
-------------------------------------------------------------------------
For the three months ended For the year ended
--------------------------- -------------------------
(unaudited) October 31 October 31 October 31 October 31
($ thousands) 2009 2008 2009 2008
-------------------------------------------------------------------------
Cash Flows from
Operating Activities
Net income $ 30,357 $ 24,485 $ 106,285 $ 102,019
Adjustments to
determine net cash
flows
Provision for
credit losses 3,393 3,187 13,500 12,000
Depreciation and
amortization 2,332 1,780 8,773 6,896
Amortization of
fair value of
employee stock
options 1,086 1,576 6,745 5,817
Future income
taxes, net (2,670) (623) (13,633) 276
Gain on sale of
securities, net (4,103) (948) (25,225) (4,725)
Accrued interest
receivable and
payable, net (28,999) (3,607) 1,032 2,719
Current income
taxes payable,
net 4,748 614 11,694 (454)
Other items, net (4,609) (201) 5,595 (5,164)
-------------------------------------------------------------------------
1,535 26,263 114,766 119,384
-------------------------------------------------------------------------
Cash Flows from
Financing Activities
Deposits, net 223,429 559,383 371,519 988,801
Securities purchased
under reverse
resale agreements,
net 53,448 - 300,242 -
Debentures issued - - - 50,000
Debentures redeemed - (35,000) - (65,000)
Common shares issued
(Note 9) 1,647 560 2,953 1,646
Preferred units
issued (Note 9) - - 209,750 -
Issuance costs on
preferred units (23) - (4,651) -
Dividends (10,824) (6,979) (38,053) (26,555)
-------------------------------------------------------------------------
267,677 517,964 841,760 948,892
-------------------------------------------------------------------------
Cash Flows from
Investing Activities
Interest bearing
deposits with
regulated financial
institutions, net 87,461 (54,107) 203,663 (57,057)
Securities, purchased (933,266) (552,162) (3,253,024) (2,609,432)
Securities, sale
proceeds 608,086 366,759 2,302,967 1,303,698
Securities, matured 57,122 229,000 348,998 1,421,159
Securities purchased
under resale
agreements, net - (67,999) 77,000 129,925
Loans, net (101,823) (458,508) (625,624) (1,230,489)
Land, buildings and
equipment (9,457) (7,296) (14,809) (12,527)
Business acquisitions
(Note 2) - - (6,481) -
-------------------------------------------------------------------------
(291,877) (544,313) (967,310) (1,054,723)
-------------------------------------------------------------------------
Change in Cash and Cash
Equivalents (22,665) (86) (10,784) 13,553
Cash and Cash
Equivalents at
Beginning of Period 10,825 (970) (1,056) (14,609)
-------------------------------------------------------------------------
Cash and Cash
Equivalents at End
of Period * $ (11,840) $ (1,056) $ (11,840) $ (1,056)
-------------------------------------------------------------------------
* Represented by:
Cash and
non-interest
bearing deposits
with financial
institutions $ 17,447 $ 8,988 $ 17,447 $ 8,988
Cheques and other
items in transit
(included in Cash
Resources) 12,677 18,992 12,677 18,992
Cheques and other
items in transit
(included in Other
Liabilities) (41,964) (29,036) (41,964) (29,036)
-------------------------------------------------------------------------
Cash and Cash
Equivalents at End
of Period $ (11,840) $ (1,056) $ (11,840) $ (1,056)
-------------------------------------------------------------------------
Supplemental
Disclosure of Cash
Flow Information
Amount of interest
paid in the period $ 85,742 $ 82,074 $ 275,943 $ 336,106
Amount of income
taxes paid in the
period 10,581 9,670 44,198 44,179
-------------------------------------------------------------------------
The accompanying notes are an integral part of the interim consolidated
financial statements.
-------------------------------------------------------------------------
Notes to Interim Consolidated Financial Statements
-------------------------------------------------------------------------
(unaudited)
($ thousands, except per share amounts)
1. Summary of Significant Accounting Policies
Basis of Presentation
These unaudited interim consolidated financial statements have been
prepared in accordance with Canadian generally accepted accounting
principles (GAAP), including the accounting requirements of the
Office of the Superintendent of Financial Institutions Canada (OSFI),
using the same accounting policies as the audited consolidated
financial statements for the year ended October 31, 2008, except as
disclosed below. Under Canadian GAAP, additional disclosures are
required in annual financial statements and accordingly, these
unaudited interim consolidated financial statements should be read in
conjunction with the audited consolidated financial statements for
the year ended October 31, 2008 as set out on pages 61 to 91 of the
Bank's 2008 Annual Report.
Changes in Accounting Policies
Goodwill and Intangible Assets
Effective November 1, 2008, the Bank adopted the Canadian Institute
of Chartered Accountants (CICA) new accounting standard, Section
3064, Goodwill and Intangible Assets. Section 3064, which replaces
Section 3062, Goodwill and Other Intangible Assets, and Section 3450,
Research and Development Costs, provides clarifying guidance on the
criteria that must be satisfied in order for an intangible asset to
be recognized, including internally developed intangible assets. The
new guidance did not have a material effect on the financial position
or earnings of the Bank.
Credit Risk and Fair Value
Effective November 1, 2008, the Bank adopted EIC 173, Credit Risk and
the Fair Value of Financial Assets and Financial Liabilities. The
abstract clarifies how the Bank's own credit risk and the credit risk
of a counterparty should be taken into account in determining the
fair value of financial assets and financial liabilities, including
derivatives. The new guidance did not have a material effect on the
financial position or earnings of the Bank.
Financial Instruments - Disclosures
Effective October 31, 2009, the Bank adopted CICA amendments to
Section 3862, Financial Instruments - Disclosures. These amendments
require enhanced disclosures over fair value measurements of
financial instruments and liquidity risks. The additional disclosures
over fair value measurements include categorization of fair value
measurements into one of three levels, ranging from those fair value
measurements that are determined through quoted market prices in an
active market to those fair value measurements that are based on
inputs that are not based on observable market data. The additional
disclosures over liquidity risks require greater clarification over
the application of liquidity risk as well as maturity analysis for
derivative financial liabilities.
2. Business Acquisition
Effective November 1, 2008 the Bank acquired 72.5% of the outstanding
shares of Adroit Investment Management Ltd. (Adroit). Adroit is an
Edmonton, Alberta based firm specializing in wealth management for
individuals, corporations and institutional clients. The results of
operations for Adroit have been included in the Bank's consolidated
financial statements since the effective acquisition date. The
initial $6,481 acquisition cost was paid in cash. Additional
contingent consideration, to a maximum of $1,675, will be paid in
cash if earnings targets are achieved over a two year period. Any
future contingent payment will be recorded when the liability has
been incurred and will increase goodwill.
The following table summarizes the fair value of the assets acquired
and liabilities assumed:
Net assets acquired
Other assets $ 90
Other intangible assets 3,964
Goodwill 2,427
---------------------------------------------------------------------
$ 6,481
---------------------------------------------------------------------
Other intangible assets include customer relationships,
non-competition agreements and a trademark. The trademark, which has
an estimated value of $280, is not subject to amortization. Adroit's
financial results, the goodwill and other intangible assets related
to the acquisition are included in the banking and trust segment. The
total amount of goodwill and intangible assets are not deductible for
income tax purposes.
3. Insurance Revenues, Net
Insurance revenues, net, as reported in other income on the
consolidated statement of income is presented net of net claims and
adjustment expenses and policy acquisition costs.
For the three months ended For the year ended
--------------------------------------------------------
October 31 July 31 October 31 October 31 October 31
2009 2009 2008 2009 2008
---------------------------------------------------------------------
Net earned
premiums $ 27,072 $ 26,895 $ 24,877 $ 104,062 $ 97,943
Commissions and
processing
fees 697 741 742 2,852 2,876
Net claims and
adjustment
expenses (17,559) (16,660) (16,564) (68,996) (64,380)
Policy
acquisition
costs (5,199) (5,181) (5,212) (20,802) (20,573)
---------------------------------------------------------------------
Total, net $ 5,011 $ 5,795 $ 3,843 $ 17,116 $ 15,866
---------------------------------------------------------------------
4. Securities
Net unrealized gains (losses) reflected on the balance sheet follow:
As at As at As at
October 31 July 31 October 31
2009 2009 2008
---------------------------------------------------------------------
Interest bearing deposits with
regulated financial institutions $ 7,390 $ 10,006 $ 940
Securities
Issued or guaranteed by Canada 1,594 490 1,417
Issued or guaranteed by a province
or municipality 2,547 3,900 1,214
Other securities 13,266 11,166 (21,386)
---------------------------------------------------------------------
Unrealized gain (losses), net $ 24,797 $ 25,562 $ (17,815)
---------------------------------------------------------------------
The securities portfolio is primarily comprised of high quality debt
instruments and preferred shares that are not held for trading
purposes and, where applicable, are typically held until maturity.
Fluctuations in value are generally attributed to changes in market
credit spreads, interest rates and shifts in the interest rate curve.
Unrealized losses are considered to be other than permanent in
nature.
5. Loans
The composition of the Bank's loan portfolio by geographic region and
industry sector follow:
British Saskatche-
($ millions) Columbia Alberta wan Manitoba Other Total
-------------------------------------------------------------------------
Loans to
Individuals
Residential
mortga-
ges(2) $ 1,005 $ 1,006 $ 120 $ 89 $ 62 $ 2,282
Other loans 62 102 15 3 1 183
-------------------------------------------------------------------------
1,067 1,108 135 92 63 2,465
-------------------------------------------------------------------------
Loans to
Businesses
Commercial 752 1,258 120 85 321 2,536
Construction
and real
estate(3) 1,126 1,361 154 61 194 2,896
Equipment
financing 324 744 50 14 125 1,257
Energy - 158 - - - 158
-------------------------------------------------------------------------
2,202 3,521 324 160 640 6,847
-------------------------------------------------------------------------
Total
Loans(1) $ 3,269 $ 4,629 $ 459 $ 252 $ 703 $ 9,312
-------------------------------------------------------------------------
Composition
Percentage
October 31,
2009 35% 50% 5% 3% 7% 100%
July 31,
2009 35% 52% 4% 3% 6% 100%
October 31,
2008 36% 53% 4% 2% 5% 100%
-------------------------------------------------------------------------
October July 31 October
31 2009 2009 31 2008
Composi- Composi- Composi-
tion tion tion
Percen- Percen- Percen-
($ millions) tage tage tage
-------------------------------------------
Loans to
Individuals
Residential
mortgages(2) 25% 23% 24%
Other loans 2 4 4
-------------------------------------------
27 27 28
-------------------------------------------
Loans to
Businesses
Commercial 27 27 27
Construction
and real
estate(3) 31 30 29
Equipment
financing 13 14 14
Energy 2 2 2
-------------------------------------------
73 73 72
-------------------------------------------
Total Loans(1) 100% 100% 100%
-------------------------------------------
Composition
Percentage
October 31,
2009
July 31,
2009
October 31,
2008
-------------------------------------------
(1) This table does not include an allocation for credit losses or
deferred revenue and premiums.
(2) Includes single- and multi-unit residental mortgages and project
(interim) mortgages on residential property.
(3) Includes commercial term mortgages and project (interim) mortgages
for non-residential property.
6. Allowance for Credit Losses
The following table shows the changes in the allowance for credit
losses:
For the three months ended For the three months ended
October 31, 2009 July 31, 2009
------------------------------------------------------------
General General
Allowance Allowance
for for
Specific Credit Specific Credit
Allowance Losses Total Allowance Losses Total
-------------------------------------------------------------------------
Balance at
beginning
of period $ 12,998 $ 61,216 $ 74,214 $ 14,084 $ 61,015 $ 75,099
Provision for
credit losses 3,456 (63) 3,393 3,168 201 3,369
Write-offs (2,164) - (2,164) (4,455) - (4,455)
Recoveries 16 - 16 201 - 201
-------------------------------------------------------------------------
Balance at
end of
period $ 14,306 $ 61,153 $ 75,459 $ 12,998 $ 61,216 $ 74,214
-------------------------------------------------------------------------
For the three months ended
October 31, 2008
------------------------------
General
Allowance
for
Specific Credit
Allowance Losses Total
-------------------------------------------------------------------------
Balance at
beginning
of period $ 10,784 $ 59,225 $ 70,009
Provision for
credit losses 1,885 1,302 3,187
Write-offs (705) - (705)
Recoveries 3,047 - 3,047
-------------------------------------------------------------------------
Balance at end
of period $ 15,011 $ 60,527 $ 75,538
-------------------------------------------------------------------------
For the year ended For the year ended
October 31, 2009 October 31, 2008
------------------------------------------------------------
General General
Allowance Allowance
for for
Specific Credit Specific Credit
Allowance Losses Total Allowance Losses Total
-------------------------------------------------------------------------
Balance at
beginning
of period $ 15,011 $ 60,527 $ 75,538 $ 7,414 $ 55,608 $ 63,022
Provision
for credit
losses 12,874 626 13,500 7,081 4,919 12,000
Write-offs (13,842) - (13,842) (2,577) - (2,577)
Recoveries 263 - 263 3,093 - 3,093
-------------------------------------------------------------------------
Balance at end
of period $ 14,306 $ 61,153 $ 75,459 $ 15,011 $ 60,527 $ 75,538
-------------------------------------------------------------------------
7. Impaired and Past Due Loans
Outstanding gross loans and impaired loans, net of allowances for
credit losses, by loan type, are as follows:
As at October 31, 2009
---------------------------------------------------
Gross Net
Gross Impaired Specific Impaired
Amount Amount Allowance Loans
---------------------------------------------------------------------
Consumer and
personal $ 1,452,682 $ 14,805 $ 1,207 $ 13,598
Real estate(1) 3,909,991 76,643 5,611 71,032
Equipment
financing 1,412,344 26,408 6,196 20,212
Commercial 2,536,635 20,088 1,292 18,796
---------------------------------------------------------------------
Total(3) $ 9,311,652 $ 137,944 $ 14,306 123,638
--------------------------------------------------------
General
allowance(2) (61,153)
---------------------------------------------------------------------
Net impaired
loans after
general
allowance $ 62,485
---------------------------------------------------------------------
As at July 31, 2009
---------------------------------------------------
Gross Net
Gross Impaired Specific Impaired
Amount Amount Allowance Loans
---------------------------------------------------------------------
Consumer and
personal $ 1,348,362 $ 16,706 $ 1,306 $ 15,400
Real estate(1) 3,892,443 63,999 5,513 58,486
Equipment
financing 1,449,319 23,223 5,494 17,729
Commercial 2,521,853 1,301 685 616
---------------------------------------------------------------------
Total(3) $ 9,211,977 $ 105,229 $ 12,998 92,231
--------------------------------------------------------
General
allowance(2) (61,216)
---------------------------------------------------------------------
Net impaired
loans after
general
allowance $ 31,015
---------------------------------------------------------------------
As at October 31, 2008
---------------------------------------------------
Gross Net
Gross Impaired Specific Impaired
Amount Amount Allowance Loans
---------------------------------------------------------------------
Consumer and
personal $ 1,288,160 $ 11,462 $ 305 $ 11,157
Real estate(1) 3,673,158 51,909 2,948 48,961
Equipment
financing 1,391,287 20,456 5,647 14,809
Commercial 2,347,002 7,809 6,111 1,698
---------------------------------------------------------------------
Total $ 8,699,607 $ 91,636 $ 15,011 76,625
--------------------------------------------------------
General
allowance(2) (60,527)
---------------------------------------------------------------------
Net impaired loans
after general
allowance $ 16,098
---------------------------------------------------------------------
(1) Multi-family residential mortgages are included in real estate
loans.
(2) The general allowance for credit risk is not allocated by loan
type.
(3) Gross impaired loans includes foreclosed assets with a carrying
value of nil (July 31, 2009 - $4,756 and October 31, 2008 - $901)
which are held for sale.
Outstanding impaired loans, net of allowance for credit losses, by
provincial location of security, are as follows:
As at October 31, 2009 As at July 31, 2009
------------------------------------------------------------
Gross Net Gross Net
Impaired Specific Impaired Impaired Specific Impaired
Amount Allowance Loans Amount Allowance Loans
---------------------------------------------------------------------
Alberta $ 74,847 $ 7,651 $ 67,196 $ 50,553 $ 5,178 $ 45,375
British
Columbia 37,655 5,000 32,655 52,477 6,737 45,740
Saskatche-
wan 1,632 609 1,023 1,424 618 806
Manitoba 337 23 314 498 336 162
Other(2) 23,473 1,023 22,450 277 129 148
---------------------------------------------------------------------
Total $137,944 $ 14,306 123,638 $105,229 $ 12,998 92,231
----------------------------- --------------------
General
allow-
ance(1) (61,153) (61,216)
---------------------------------------------------------------------
Net
impaired
loans
after
general
allow-
ance $ 62,485 $ 31,015
---------------------------------------------------------------------
As at October 31, 2008
------------------------------
Gross Net
Impaired Specific Impaired
Amount Allowance Loans
---------------------------------------------------------------------
Alberta
British $ 48,133 $ 9,005 $ 39,128
Columbia 40,656 4,626 36,030
Saskatche-
wan 2,155 792 1,363
Manitoba 389 389 -
Other 303 199 104
---------------------------------------------------------------------
Total $ 91,636 $ 15,011 76,625
-----------------------------------------------------------
General
allow-
ance(1) (60,527)
---------------------------------------------------------------------
Net
impaired
loans
after
general
allow-
ance $ 16,098
---------------------------------------------------------------------
(1) The general allowance for credit risk is not allocated by
province.
(2) Included in Other is a corporate loan with security that is not
identifiable to a specific province.
During the quarter and year ended October 31, 2009, interest
recognized as income on impaired loans totaled $326 and $1,726
respectively (2008 - $56 and $360).
Gross impaired loans exclude certain past due loans where payment of
interest or principal is contractually in arrears, which are not
classified as impaired. Details of such past due loans that have not
been included in the gross impaired amount are as follows:
As at October 31, 2009
-------------------------------------------------
1 - 30 31 - 60 61 - 90 More than
days days days 90 days Total
---------------------------------------------------------------------
Residential
mortgages $ 5,002 $ 11,102 $ 1,828 $ - $ 17,932
Other loans 22,531 18,170 2,866 - 43,567
---------------------------------------------------------------------
$ 27,533 $ 29,272 $ 4,694 $ - $ 61,499
---------------------------------------------------------------------
---------------------------------------------------------------------
Total as at
July 31, 2009 $ 15,942 $ 45,106 $ 5,847 $ - $ 66,895
---------------------------------------------------------------------
Total as at
October 31, 2008 $ 18,949 $ 12,560 $ 689 $ - $ 32,198
---------------------------------------------------------------------
8. Derivative Financial Instruments
For the quarter and year ended October 31, 2009, a net unrealized
after tax gain of $889 and $9,453 respectively (2008 - $5,437 and
$9,341) was recorded in other comprehensive income for changes in
fair value of the effective portion of derivatives designated as cash
flow hedges, and $nil (2008 - $nil) was recorded in other income for
changes in fair value of the ineffective portion of derivatives
classified as cash flow hedges. Amounts accumulated in other
comprehensive income are reclassified to net income in the same
period that interest on certain floating rate loans (i.e. the hedged
items) affect income. For the quarter and year ended October 31,
2009, a net gain after tax of $1,955 and $9,379 respectively (2008 -
$541 and $1,773) was reclassified to net income. A net gain of $1,678
(2008 - $2,432) after tax recorded in accumulated other comprehensive
income (loss) as at October 31, 2009 is expected to be reclassified
to net income in the next 12 months and will offset variable cash
flows from floating rate loans.
The following table shows the notional value outstanding for
derivative financial instruments and the related fair value:
As at October 31, 2009 As at July 31, 2009
------------------------------------------------------------
Positive Negative Positive Negative
Notional Fair Fair Notional Fair Fair
Amount Value Value Amount Value Value
-------------------------------------------------------------------------
Interest rate
swaps
designated as
cash flow
hedges(1) $235,000 $ 2,265 $ - $235,000 $ 3,922 $ -
Equity
contracts(2) 2,000 - 33 2,000 - 40
Foreign
exchange
contracts(3) 2,496 44 41 2,234 128 124
Embedded
derivatives
in
equity-linked
deposits(2) n/a 25 - n/a 31 -
Other
forecasted
transactions - - - - - -
-------------------------------------------------------------------------
Derivative
related
amounts $ 2,334 $ 74 $ 4,081 $ 164
-------------------------------------------------------------------------
As at October 31, 2008
-----------------------------
Positive Negative
Notional Fair Fair
Amount Value Value
-------------------------------------------------------------------------
Interest rate
swaps
designated as
cash flow
hedges $593,000 $ 9,827 $ -
Equity
contracts 4,400 - 139
Foreign
exchange
contracts 2,600 2 24
Embedded
derivatives
in
equity-linked
deposits n/a 151 -
Other
forecasted
transactions - - -
-------------------------------------------------------------------------
Derivative
related
amounts $ 9,980 $ 163
-------------------------------------------------------------------------
(1) Interest rate swaps outstanding at October 31, 2009 mature between
November 2009 and June 2010.
(2) Equity contracts and equity-linked deposits outstanding at
October 31, 2009 mature between March 2010 and March 2011.
(3) Foreign exchange contracts outstanding at October 31, 2009 mature
between November 2009 and April 2010.
n/a - not applicable.
There were no forecasted transactions that failed to occur during the
year ended October 31, 2009.
9. Capital Stock
Share Capital
For the three months ended
---------------------------------------------------
October 31, 2009 October 31, 2008
---------------------------------------------------
Number of Number of
Shares Amount Shares Amount
---------------------------------------------------------------------
Preferred Shares
- Series 3
Outstanding at
beginning of
period 8,390,000 $ 209,750 - $ -
Issued during the
period - - - -
---------------------------------------------------------------------
Outstanding at
end of period 8,390,000 209,750 - -
---------------------------------------------------------------------
Common Shares
Outstanding at
beginning of
period 63,738,113 224,405 63,341,949 221,103
Issued on
exercise of
warrants 624 9 - -
Issued under
dividend
reinvestment
plan 38,760 744 - -
Issued on
exercise or
exchange of
options 125,963 894 115,193 560
Transferred from
contributed
surplus on
exercise or
exchange of
options - 428 - 251
---------------------------------------------------------------------
Outstanding at end
of period 63,903,460 226,480 63,457,142 221,914
---------------------------------------------------------------------
Share Capital $ 436,230 $ 221,914
---------------------------------------------------------------------
For the year ended
---------------------------------------------------
October 31, 2009 October 31, 2008
---------------------------------------------------
Number of Number of
Shares Amount Shares Amount
---------------------------------------------------------------------
Preferred Shares
- Series 3
Outstanding at
beginning of
period - $ - - $ -
Issued during the
period 8,390,000 209,750 - -
---------------------------------------------------------------------
Outstanding at end
of period 8,390,000 209,750 - -
---------------------------------------------------------------------
Common Shares
Outstanding at
beginning of
period 63,457,142 221,914 62,836,189 219,004
Issued on exercise
of warrants 624 9 - -
Issued under
dividend
reinvestment plan 38,760 744 - -
Issued on exercise
or exchange of
options 406,934 2,200 620,953 1,646
Transferred from
contributed
surplus on
exercise or
exchange of
options - 1,613 - 1,264
---------------------------------------------------------------------
Outstanding at
end of period 63,903,460 226,480 63,457,142 221,914
---------------------------------------------------------------------
Share Capital $ 436,230 $ 221,914
---------------------------------------------------------------------
In March 2009, the Bank issued 8.4 million preferred units at $25 per
unit, for total proceeds of $209.8 million. Of the total, 5.4 million
preferred units were issued by way of a private placement for total
proceeds of $135.0 million, and 3.0 million were issued under a
public offering for total proceeds of $74.8 million.
The preferred units issued by way of the private placement and the
public offering each consist of one Non-Cumulative 5-Year Rate Reset
Preferred Share, Series 3 (Series 3 Preferred Shares) in the capital
of the Bank with an issue price of $25.00 per share and 1.7857 and
1.7800 common share purchase warrants, respectively. Each warrant is
exercisable at a price of $14.00 to purchase one common share in the
capital of the Bank until March 3, 2014.
Holders of the Series 3 Preferred Shares are entitled to receive
non-cumulative quarterly fixed dividends for the initial five-year
period ending April 30, 2014 of 7.25% per annum, payable quarterly,
as and when declared by the Board of Directors. The dividend rate on
Series 3 Preferred Shares will reset May 1, 2014 and every five years
thereafter at a level of 500 basis points over the then current
five-year Government of Canada bond yield. On April 30, 2014, and
every five years thereafter, holders of Series 3 Preferred Shares
will, subject to certain conditions, have the option to convert their
shares to Non-Cumulative Floating Rate Preferred Shares, Series 4
(Series 4 Preferred Shares). Holders of the Series 4 Preferred Shares
will be entitled to a floating quarterly dividend rate equal to the
90-day Canadian treasury bill rate plus 500 basis points, as and when
declared by the Board of Directors.
The Series 3 Preferred Shares are not redeemable prior to April 30,
2014. Subject to the provisions of the Bank Act, the prior consent of
OSFI and the provisions described in the prospectus for the public
offering, on April 30, 2014 and on April 30 every five years
thereafter, the Bank may redeem all or any part of the then
outstanding Series 3 Preferred Shares at the Bank's option without
the consent of the holder, by the payment of an amount in cash for
each such share so redeemed of $25.00 together with all declared and
unpaid dividends to the date fixed for redemption.
Subject to the provisions of the Bank Act, the prior consent of OSFI
and the provisions described in the prospectus for the public
offering, on not more than 60 nor less than 30 days' notice, the Bank
may redeem all or any part of the then outstanding Series 4 Preferred
Shares at the Bank's option without the consent of the holder by the
payment of an amount in cash for each such share so redeemed of: (i)
$25.00 together with all declared and unpaid dividends to the date
fixed for redemption in the case of redemptions on April 30, 2019 and
on April 30 every five years thereafter; or (ii) $25.50 together with
all declared and unpaid dividends to the date fixed for redemption in
the case of redemptions on any other date on or after April 30, 2014.
Warrants to Purchase Common Shares
For the three months ended For the year ended
-----------------------------------------------------
Number of October 31, October 31, October 31, October 31,
Warrants 2009 2008 2009 2008
---------------------------------------------------------------------
Outstanding at
beginning of
period 14,964,980 - - -
Issued - - 14,964,980 -
Exercised (624) - (624) -
---------------------------------------------------------------------
Outstanding at
end of period 14,964,356 - 14,964,356 -
---------------------------------------------------------------------
The warrants issued in March 2009 were part of the Preferred Unit
issuance discussed in the section above.
Dividend Reinvestment Plan
During the period, the Bank introduced a dividend reinvestment plan
(plan) that provides holders of the Bank's common shares and holders
of any other class of shares deemed eligible by the Bank's Board of
Directors with the opportunity to direct cash dividends paid on any
class of their eligible shares towards the purchase of additional
common shares. Currently, the Board of Directors has deemed that
holders of the Bank's Non-Cumulative 5-Year Rate Reset Preferred
Shares, Series 3 are eligible to participate in the plan. The plan is
only open to shareholders residing in Canada.
At the option of the Bank, the common shares may be issued from the
Bank's treasury at an average market price based on the closing
prices of a board lot of common shares on the Toronto Stock Exchange
for the five trading days immediately preceding the dividend payment
date, with a discount of between 0% to 5% at the Bank's discretion.
The Bank also has the option to fund the plan through the open market
at market prices. During the three month period ended October 31,
2009, 38,760 common shares were issued under the plan from the Bank's
treasury with a 2% discount.
10. Stock-Based Compensation
Stock Options
For the three months ended
--------------------------------------------------
October 31, 2009 October 31, 2008
---------------------------------------------------------------------
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Options Price Options Price
---------------------------------------------------------------------
Options
Balance at
beginning of
period 4,626,405 $ 18.37 5,359,842 $ 20.53
Granted - - 32,790 21.44
Exercised or
exchanged (208,600) 12.02 (152,200) 9.33
Forfeited (23,200) 20.01 (35,550) 25.49
---------------------------------------------------------------------
Balance at end of
period 4,394,605 $ 18.66 5,204,882 $ 20.83
---------------------------------------------------------------------
For the year ended
--------------------------------------------------
October 31, 2009 October 31, 2008
---------------------------------------------------------------------
Weighted Weighted
Average Average
Number of Exercise Number of Exercise
Options Price Options Price
---------------------------------------------------------------------
Options
Balance at
beginning of
period 5,204,882 $ 20.83 4,911,277 $ 16.96
Granted 1,465,035 13.33 1,249,032 28.39
Exercised or
exchanged (933,900) 10.56 (838,177) 8.98
Forfeited (1,341,412) 26.88 (117,250) 24.26
--------------------------------------------------------------------
Balance at end
of period 4,394,605 $ 18.66 5,204,882 $ 20.83
---------------------------------------------------------------------
Exercisable at
end of period 1,742,100 $ 18.22 1,870,500 $ 13.10
---------------------------------------------------------------------
The terms of the share incentive plan allow the holders of vested
options a cashless settlement alternative whereby the option holder
can either (a) elect to receive shares by delivering cash to the Bank
in the amount of the option exercise price or (b) elect to receive
the number of shares equivalent to the excess of the market value of
the shares under option over the exercise price. Of the 933,900
options (2008 - 838,177) exercised or exchanged in the year ended
October 31, 2009, option holders exchanged the rights to 722,400
options (2008 - 651,727) and received 195,434 shares (2008 - 434,503)
in return under the cashless settlement alternative.
For the year ended October 31, 2009, salary expense of $6,745 (2008 -
$5,817) was recognized relating to the estimated fair value of
options granted since November 1, 2002, which included the stock
option forfeiture discussed below. The fair value of options granted
was estimated using a binomial option pricing model with the
following variables and assumptions: (i) risk-free interest rate of
2.2% (2008 - 3.8%), (ii) expected option life of 4.0 years (2008 -
4.0 years), (iii) expected volatility of 38% (2008 - 23%), and (iv)
expected dividends of 3.6% (2008 - 1.5%). The weighted average fair
value of options granted was estimated at $2.94 (2008 - $5.84) per
share.
In March 2009, certain employees voluntarily and irrevocably
released, without consideration, all right, title and interest in
1,283,062 stock options. The unamortized fair value of these
forfeited options ($1,696) was recognized at that time as additional
non-tax deductible salary expense with an offsetting increase to
contributed surplus.
Further details relating to stock options outstanding and exercisable
at October 31, 2009 follow:
Options Outstanding Options Exercisable
---------------------------------------------------
Weighted
Average
Remaining Weighted Weighted
Contract- Average Average
Range of Exercise Number of ual Life Exercise Number of Exercise
Prices Options (years) Price Options Price
---------------------------------------------------------------------
$ 8.58 to $10.84 26,500 2.7 $ 9.20 10,000 $ 10.21
$11.76 to $13.78 1,209,735 3.4 12.16 239,500 13.78
$15.46 to $17.58 1,185,100 2.3 16.61 733,500 16.44
$19.16 to $21.46 1,063,890 2.1 21.45 753,100 21.44
$22.29 to $26.3 8 684,600 2.8 25.64 6,000 22.30
$28.11 to $31.18 224,780 3.1 31.13 - -
---------------------------------------------------------------------
Total 4,394,605 2.7 $ 18.66 1,742,100 $ 18.22
---------------------------------------------------------------------
Restricted Share Units
During the year, the Bank adopted a plan to grant Restricted Share
Units (RSUs) as part of its long-term incentive plan. Under this
plan, certain employees are eligible to receive an award in the form
of RSUs. Each RSU entitles the holder to receive the cash equivalent
of the market value of the Bank's common shares at the vesting date
and an amount equivalent to the dividends paid on the common shares
during the vesting period. RSUs vest on each anniversary of the grant
in equal one-third installments over a vesting period of three years.
Salary expense is recognized evenly over the vesting period except
where the employee is eligible to retire prior to the vesting date,
in which case the expense is recognized between the grant date and
the date the employee is eligible to retire.
For the quarter and year ended October 31, 2009, salary expense of
$1,826 and $3,985 respectively ($1,269 and $2,770, net of tax) was
recognized related to RSUs. As at October 31, 2009, the liability for
the RSUs held under this plan was $3,985. At the end of each period,
the liability and salary expense are adjusted to reflect changes in
the market value of the Bank's common shares.
For the year ended October 31, 2009 Number of RSUs
---------------------------------------------------------------------
Restricted Share Units
Balance at beginning of period -
Granted 286,929
Vested -
Forfeited (1,732)
Balance at end of period 285,197
---------------------------------------------------------------------
11. Contingent Liabilities and Commitments
Significant contingent liabilities and commitments, including
guarantees provided to third parties, are discussed in Note 20 of the
Bank's audited consolidated financial statements for the year ended
October 31, 2008 (see pages 80 to 81 of the 2008 Annual Report) and
include:
As at As at As at
October 31 July 31 October 31
2009 2009 2008
---------------------------------------------------------------------
Guarantees and standby letters
of credit
Balance outstanding $ 196,380 $ 208,166 $ 232,649
Business credit cards
Total approved limit 10,496 10,610 11,503
Balance outstanding 2,566 2,357 2,778
---------------------------------------------------------------------
In the ordinary course of business, the Bank and its subsidiaries are
party to legal proceedings. Based on current knowledge, management
does not expect the outcome of any of these proceedings to have a
material effect on the consolidated financial position or results of
operations.
12. Financial Instruments
As a financial institution, most of the Bank's balance sheet is
comprised of financial instruments and the majority of net income
results from gains, losses, income and expenses related to the same.
Financial instrument assets include cash resources, securities,
securities purchased under resale agreements, loans and derivative
financial instruments. Financial instrument liabilities include
deposits, securities purchased under reverse resale agreements,
derivative financial instruments and subordinated debentures.
The use of financial instruments exposes the Bank to credit,
liquidity and market risk. A discussion of how these and other risks
are managed can be found in the 2008 consolidated annual financial
statements.
The value of financial assets recorded on the consolidated balance
sheet at October 31, 2009 at fair value (cash, securities, securities
purchased under resale agreements and derivatives) was determined
using published market prices quoted in active markets for 88%
(2008 - 92%) of the portfolio and estimated using a valuation
technique based on observable market data for 12% (2008 - 8%) of the
portfolio. The value of liabilities recorded on the consolidated
balance sheet at fair value (derivatives and securities purchased
under reverse resale agreements) was determined for the entire
portfolio using a valuation technique based on observable market
data.
The table below sets out the fair values of financial instruments
(including certain derivatives) using the valuation methods and
assumptions outlined in the 2008 consolidated annual financial
statements. The table does not include assets and liabilities that
are not considered financial instruments.
October 31, 2009 October 31, 2008
-----------------------------------------------------------
Fair Fair
Value Value
Over Over
(Under) (Under)
Book Fair Book Book Fair Book
Value Value Value Value Value Value
-------------------------------------------------------------------------
Assets
Cash
resources $297,104 $297,104 $ - $492,173 $492,173 $ -
Securities 1,891,409 1,891,409 - 1,228,964 1,228,964 -
Securities
purchased
under
resale
agreements - - - 77,000 77,000 -
Loans(1) 9,320,749 9,368,074 47,325 8,700,672 8,635,811 (64,861)
Other
assets(2) 97,179 97,179 - 82,782 82,782 -
Derivative
related 2,334 2,334 - 9,980 9,980 -
Liabilities
Depo-
sits(1) 9,628,949 9,739,360 110,411 9,258,776 9,247,017 (11,759)
Other
liabili-
ties(3) 265,295 265,295 - 232,678 232,678 -
Securities
purchased
under
reverse
resale
agreements 300,242 300,242 - - - -
Subordinated
debentures 375,000 377,363 2,363 375,000 387,774 12,774
Derivative
related 74 74 - 163 163 -
-------------------------------------------------------------------------
-------------------------------------------------------------------------
(1) Loans and deposits exclude deferred premiums and deferred
revenue, which are not financial instruments.
(2) Other assets exclude land, buildings and equipment, goodwill and
other intangible assets, reinsurers' share of unpaid claims and
adjustment expenses, future income tax asset, prepaid and
deferred expenses, financing costs and other items that are not
financial instruments.
(3) Other liabilities exclude future income tax liability, deferred
revenue, unearned insurance premiums and other items that are not
financial instruments.
(4) For further information on interest rates associated with
financial assets and liabilities, including derivative
instruments, refer to Note 13.
13. Interest Rate Sensitivity
The Bank's exposure to interest rate risk as a result of a difference
or gap between the maturity or repricing behavior of interest
sensitive assets and liabilities, including derivative financial
instruments, is discussed in Note 28 of the audited consolidated
financial statements for the year ended October 31, 2008 (see page 86
of the 2008 Annual Report). The following table shows the gap
position for selected time intervals.
Asset Liability Gap Positions
Floating
Rate and Total
Within 1 to 3 3 Months Within
($ millions) 1 Month Months to 1 Year 1 Year
-------------------------------------------------------------------------
October 31, 2009
Assets
Cash resources and
securities $ 92 $ 36 $ 352 $ 480
Loans 4,792 585 929 6,306
Other assets - - - -
Derivative financial
instruments(1) - - 239 239
-------------------------------------------------------------------------
Total 4,884 621 1,520 7,025
-------------------------------------------------------------------------
Liabilities and Equity
Deposits 3,796 826 1,560 6,182
Other liabilities 303 6 27 336
Debentures 60 - - 60
Shareholders' equity - - - -
Derivative financial
instruments(1) 239 - - 239
-------------------------------------------------------------------------
Total $ 4,398 $ 832 $ 1,587 $ 6,817
-------------------------------------------------------------------------
Interest Rate
Sensitive Gap $ 486 $ (211) $ (67) $ 208
-------------------------------------------------------------------------
Cumulative Gap $ 486 $ 275 $ 208 $ 208
-------------------------------------------------------------------------
Cumulative Gap as a
percentage of total
assets 4.1% 2.3% 1.8% 1.8%
-------------------------------------------------------------------------
July 31, 2009
Assets $ 5,040 $ 686 $ 1,375 $ 7,101
Liabilities and equity 3,813 954 1,845 6,612
-------------------------------------------------------------------------
Interest rate sensitive
gap $ 1,227 $ (268) $ (470) $ 489
-------------------------------------------------------------------------
Cumulative gap $ 1,227 $ 959 $ 489 $ 489
-------------------------------------------------------------------------
Cumulative gap as a
Percentage of total
assets 10.6% 8.3% 4.2% 4.2%
-------------------------------------------------------------------------
October 31, 2008
Cumulative gap $ 1,068 $ 963 $ 234 $ 234
-------------------------------------------------------------------------
Cumulative gap as a
percentage of total
assets 9.5% 8.6% 2.1% 2.1%
-------------------------------------------------------------------------
Non-
1 Year to More than interest
($ millions) 5 Years 5 Years Sensitive Total
-------------------------------------------------------------------------
October 31, 2009
Assets
Cash resources and
securities $ 1,573 $ 81 $ 55 $ 2,189
Loans 2,890 128 (88) 9,236
Other assets - - 211 211
Derivative financial
instruments(1) - - - 239
-------------------------------------------------------------------------
Total 4,463 209 178 11,875
-------------------------------------------------------------------------
Liabilities and Equity
Deposits 3,343 105 (13) 9,617
Other liabilities 36 8 277 657
Debentures 240 75 - 375
Shareholders' equity - - 987 987
Derivative financial
instruments(1) - - - 239
-------------------------------------------------------------------------
Total $ 3,619 $ 188 $ 1,251 $ 11,875
-------------------------------------------------------------------------
Interest Rate
Sensitive Gap $ 844 $ 21 $ (1,073) $ -
-------------------------------------------------------------------------
Cumulative Gap $ 1,052 $ 1,073 $ - $ -
-------------------------------------------------------------------------
Cumulative Gap as a
percentage of total
assets 8.9% 9.0% -% -%
-------------------------------------------------------------------------
July 31, 2009
Assets $ 4,123 $ 168 $ 178 $ 11,570
Liabilities and equity 3,550 188 1,220 11,570
-------------------------------------------------------------------------
Interest rate sensitive
gap $ 573 $ (20) $ (1,042) $ -
-------------------------------------------------------------------------
Cumulative gap $ 1,062 $ 1,042 $ - $ -
-------------------------------------------------------------------------
Cumulative gap as a
Percentage of total
assets 9.2% 9.0% -% -%
-------------------------------------------------------------------------
October 31, 2008
Cumulative gap $ 818 $ 770 $ - $ -
-------------------------------------------------------------------------
Cumulative gap as a
percentage of total
assets 7.3% 6.9% -% -%
-------------------------------------------------------------------------
(1) Derivative financial instruments are included in this table at the
notional amount.
(2) Accrued interest is excluded in calculating interest sensitive assets
and liabilities.
(3) Potential prepayments of fixed rate loans and early redemption of
redeemable fixed term deposits have not been estimated. Redemptions
of fixed term deposits where depositors have this option are not
expected to be material. The majority of fixed rate loans, mortgages
and leases are either closed or carry prepayment penalties.
The effective, weighted average interest rates for each class of
financial assets and liabilities are shown below:
Floating
October Rate and 3 Months Total 1 Year More
31, Within 1 to 3 to 1 Within to than
2009 1 Month Months Year 1 Year 5 Years 5 Years Total
-------------------------------------------------------------------------
Total
assets 3.8% 2.6% 4.5% 3.8% 4.9% 5.8% 4.3%
Total
liabil-
ities 0.7 2.4 3.1 1.4 3.6 5.8 2.3
-------------------------------------------------------------------------
Interest
rate
sensitive
gap 3.1% 0.2% 1.4% 2.4% 1.3% -% 2.0%
-------------------------------------------------------------------------
July 31,
2009
-------------------------------------------------------------------------
Total
assets 3.7% 2.5% 4.6% 3.8% 5.1% 6.1% 4.3%
Total
liabil-
ities 0.6 3.1 3.3 1.7 3.9 5.8 2.5
-------------------------------------------------------------------------
Interest
rate
sensitive
gap 3.1% (0.6)% 1.3% 2.1% 1.2% 0.3% 1.8%
-------------------------------------------------------------------------
October
31,
2008
-------------------------------------------------------------------------
Total
assets 4.7% 4.2% 5.1% 4.8% 5.4% 5.8% 5.0%
Total liabil-
ities 2.2 3.6 4.0 2.9 4.2 5.7 3.4
-------------------------------------------------------------------------
Interest
rate
sensitive
gap 2.5% 0.6% 1.1% 1.9% 1.2% 0.1% 1.6%
-------------------------------------------------------------------------
Based on the current interest rate gap position, it is estimated that
a one-percentage point increase in all interest rates would decrease
net interest income by approximately 2.5% or $6,574 (July 31, 2009 -
3.8% or $9,493 increase to net interest income) and decrease other
comprehensive income $21,355 (July 31, 2009 - $20,689) net of tax,
respectively over the following twelve months. A one-percentage point
decrease in all interest rates would increase net interest income by
approximately 3.8% or $10,241 million (July 31, 2009 - 5.2% or
$13,058) and increase other comprehensive income $21,355 (July 31,
2009 - $20,689) net of tax.
14. Segmented Information
The Bank operates principally in two industry segments - banking and
trust, and insurance. These two segments differ in products and
services but are both within the same geographic region. The banking
and trust segment provides banking, trust and wealth management
services to personal clients, small to medium-sized commercial
business clients and institutional clients primarily in Western
Canada. The insurance segment provides home and auto insurance to
individuals in British Columbia and Alberta.
Banking and Trust Insurance
-----------------------------------------------------------
Three months ended Three months ended
-----------------------------------------------------------
October July 31 October October July 31 October
31 2009 2009 31 2008 31 2009 2009 31 2008
-------------------------------------------------------------------------
Net interest
income
(teb)(1) $ 66,387 $ 59,340 $ 56,993 $ 1,625 $ 1,594 $ 1,629
Less teb
adjustment 2,219 2,018 1,375 178 171 165
-------------------------------------------------------------------------
Net interest
income per
financial
statements 64,168 57,322 55,618 1,447 1,423 1,464
Other
income(2) 17,019 18,651 11,580 5,068 5,953 3,857
-------------------------------------------------------------------------
Total
revenues 81,187 75,973 67,198 6,515 7,376 5,321
Provision
for credit
losses 3,393 3,369 3,187 - - -
Non-interest
expenses 38,997 37,283 32,913 2,576 2,927 2,446
Provision for
income taxes 11,271 9,791 8,788 1,049 1,200 700
Non-controlling
interest in
subsidiary 59 50 - - - -
-------------------------------------------------------------------------
Net income $ 27,467 $ 25,480 $ 22,310 $ 2,890 $ 3,249 $ 2,175
-------------------------------------------------------------------------
Total
average
assets
($ millions)
(3) $ 11,342 $ 11,142 $ 9,902 $ 212 $ 200 $ 191
-------------------------------------------------------------------------
Total
-----------------------------
Three months ended
-----------------------------
October July 31 October
31 2009 2009 31 2008
-------------------------------------------------------------------------
Net interest income (teb)(1) $ 68,012 $ 60,934 $ 58,622
Less teb adjustment 2,397 2,189 1,540
-------------------------------------------------------------------------
Net interest income per
financial statements 65,615 58,745 57,082
Other income 22,087 24,604 15,437
-------------------------------------------------------------------------
Total revenues 87,702 83,349 72,519
Provision for credit losses 3,393 3,369 3,187
Non-interest expenses 41,573 40,210 35,359
Provision for income taxes 12,320 10,991 9,488
Non-controlling interest in subsidiary 59 50 -
-------------------------------------------------------------------------
Net income $ 30,357 $ 28,729 $ 24,485
-------------------------------------------------------------------------
Total average assets ($ millions)(3) $ 11,554 $ 11,342 $ 10,093
-------------------------------------------------------------------------
Banking and Trust Insurance Total
-----------------------------------------------------------
Year ended Year ended Year ended
-----------------------------------------------------------
October October October October October October
31 2009 31 2008 31 2009 31 2008 31 2009 31 2008
-------------------------------------------------------------------------
Net interest
income
(teb)(1) $230,227 $222,837 $ 6,127 $ 5,780 $236,354 $228,617
Less teb
adjustment 7,203 5,191 644 480 7,847 5,671
-------------------------------------------------------------------------
Net interest
income per
financial
statements 223,024 217,646 5,483 5,300 228,507 222,946
Other
income(2) 74,013 54,338 17,599 15,902 91,612 70,240
-------------------------------------------------------------------------
Total
revenues 297,037 271,984 23,082 21,202 320,119 293,186
Provision
for credit
losses 13,500 12,000 - - 13,500 12,000
Non-interest
expenses 147,571 125,748 10,611 9,418 158,182 135,166
Provision for
income taxes 38,560 40,589 3,360 3,412 41,920 44,001
Non-controlling
interest in
subsidiary 232 - - - 232 -
-------------------------------------------------------------------------
Net income $ 97,174 $ 93,647 $ 9,111 $ 8,372 $106,285 $102,019
-------------------------------------------------------------------------
Total
average
assets
($ millions)
(3) $ 11,055 $ 9,747 $ 198 $ 184 $ 11,253 $ 9,931
-------------------------------------------------------------------------
(1) Taxable Equivalent Basis (teb) - Most financial institutions analyze
revenue on a taxable equivalent basis to permit uniform measurement
and comparison of net interest income. Net interest income (as
presented in the consolidated statement of income) includes tax-
exempt income on certain securities. Since this income is not
taxable, the rate of interest or dividends received is significantly
lower than would apply to a loan or security of the same amount. The
adjustment to taxable equivalent basis increases interest income and
the provision for income taxes to what they would have been had the
tax-exempt securities been taxed at the statutory rate. The taxable
equivalent basis does not have a standardized meaning prescribed by
generally accepted accounting principles and therefore may not be
comparable to similar measures presented by other financial
institutions.
(2) Other income for the insurance segment is presented net of net
claims, adjustment expenses and policy acquisition expenses and
includes gains on sale of securities.
(3) Assets are disclosed on an average daily balance basis as this
measure is most relevant to a financial institution and is the
measure reviewed by management.
15. Capital Management
Capital for Canadian financial institutions is managed and reported
in accordance with a capital management framework specified by OSFI
commonly called Basel II.
Capital funds are managed in accordance with policies and plans that
are regularly reviewed and approved by the Board of Directors and
take into account forecasted capital needs and markets. The goal is
to maintain adequate regulatory capital to be considered well
capitalized, protect customer deposits and provide capacity for
internally generated growth and strategic opportunities that do not
otherwise require accessing the public capital markets, all while
providing a satisfactory return for shareholders.
During March 2009, the Bank issued 8.4 million preferred units for
total proceeds of $209.8 million, which qualify as Tier 1 capital
(refer to Note 9). The preferred units, issued by way of the private
placement and the public offering, each consist of one Non-Cumulative
5-Year Rate Reset Preferred Share, Series 3 (Series 3 Preferred
Shares) in the capital of the Bank with an issue price of $25.00 per
share and 1.7857 and 1.7800 common share purchase warrants,
respectively. Each warrant is exercisable at a price of $14.00 to
purchase one common share in the capital of the Bank until March 3,
2014 (refer to Note 9).
Additional information about the Bank's capital management practices
is provided in Note 31 to the 2008 audited financial statements
beginning on page 89 of the 2008 Annual Report.
Capital Structure and Regulatory Ratios
As at As at As at
October 31 July 31 October 31
2009 2009 2008
-------------------------------------------------------------------------
Capital
Tier 1 $ 1,063,287 $ 1,040,753 $ 775,445
Total 1,449,790 1,432,146 1,168,272
-------------------------------------------------------------------------
Capital ratio
Tier 1 11.3% 11.2% 8.9%
Total 15.4 15.4 13.5
Assets to capital multiple 8.1 x 8.0 x 9.2 x
-------------------------------------------------------------------------
During the quarter and year ended October 31, 2009, the Bank complied
with all internal and external capital requirements.
16. Future Accounting Changes International Financial Reporting Standards
The CICA will transition Canadian GAAP for publicly accountable
entities to International Financial Reporting Standards (IFRS). The
Bank's consolidated financial statements will be prepared in
accordance with IFRS for the fiscal year commencing November 1, 2011
and will include comparative information for the prior year.
During 2008, the Bank commenced a four stage project to identify and
evaluate the impact of the transition to IFRS on the consolidated
financial statements and develop a plan to complete the transition.
The project plan includes the following phases - diagnostic, design
and planning, solution development, and implementation. The
diagnostic and the design and planning phases are complete, and the
solution development phase is expected to be completed by the end of
fiscal 2010.
The impact of the transition to IFRS on the Bank's consolidated
financial statements for current standards is not yet determinable.
CWB continues to monitor the International Accounting Standards
Board's proposed changes to standards during Canada's transition to
IFRS. These proposed changes may have a significant impact on our
implementation plan and future financial statements.
-------------------------------------------------------------------------
Shareholder Information
-------------------------------------------------------------------------
Head Office Transfer Agent and Registrar
Canadian Western Bank & Trust Valiant Trust Company
Suite 3000, Canadian Western Suite 310, 606 - 4th Street S.W.
Bank Place Calgary, AB T2P 1T1
10303 Jasper Avenue Telephone: (403) 233-2801
Edmonton, AB T5J 3X6 Fax: (403) 233-2857
Telephone: (780) 423-8888 Website: www.valianttrust.com
Fax: (780) 423-8897 E-mail: [email protected]
Website: www.cwbankgroup.com
Eligible Dividends Designation
Subsidiary Offices
CWB designates all dividends for both
Canadian Western Trust Company common and preferred shares paid to
Suite 600, 750 Cambie Street Canadian residents as "eligible
Vancouver, BC V6B 0A2 dividends", as defined in the Income
Toll-free: 1-800-663-1124 Tax Act (Canada), unless otherwise
Fax: (604) 669-6069 noted.
Website: www.cwt.ca
Dividend Reinvestment Plan
Canadian Direct Insurance
Incorporated CWB's dividend reinvestment plan allows
Suite 600, 750 Cambie Street common and preferred shareholders to
Vancouver, BC V6B 0A2 purchase additional common shares
Telephone: (604) 699-3678 by reinvesting their cash dividend
Fax: (604) 699-3851 without incurring brokerage and
Website: www.canadiandirect.com commission fees. For information about
participation in the plan, please
Valiant Trust Company contact the Transfer Agent
Suite 310, 606 - 4th Street S.W. and Registrar or visit
Calgary, AB T2P 1T1 www.cwbankgroup.com.
Toll-free: 1-866-313-1872
Fax: (403) 233-2857 Investor Relations
Website: www.valianttrust.com For further financial information
contact:
Adroit Investment Management Ltd. Kirby Hill, CFA
Suite 1250, Canadian Western Assistant Vice President, Investor
Bank Place and Public Relations
10303 Jasper Avenue Canadian Western Bank
Edmonton, AB T5J 3N6 Telephone: (780) 441-3770
Telephone: (780) 429-3500 Toll-free: 1-800-836-1886
Fax: (780) 429-9680 Fax: (780) 969-8326
Website: E-mail:
www.adroitinvestments.ca [email protected]
Stock Exchange Listings Online Investor Information
The Toronto Stock Exchange Additional investor information
Common Shares: CWB including supplemental financial
Series 3 Preferred Shares: information and corporate
CWB.PR.A presentations are available on
Common Share Purchase Warrants: CWB's website at www.cwbankgroup.com.
CWB.WT
Quarterly Conference Call and Webcast
CWB's quarterly conference call and
live audio webcast will take place
on December 3, 2009 at 4:30 p.m. ET.
The webcast will be archived on the
Bank's website at www.cwbankgroup.com
for sixty days. A replay of the
conference call will be available
until December 17, 2009 by dialing
(416) 849-0833 or toll free
(800) 642-1687 and entering
passcode 41377847.
For further information: Larry M. Pollock, President and Chief Executive Officer, Canadian Western Bank, Phone: (780) 423-8888; Kirby Hill, CFA, Assistant Vice President, Investor and Public Relations, Canadian Western Bank, Phone: (780) 441-3770, E-mail: [email protected]
Share this article